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4 Things to Remember When Applying for a Loan
Whether you need money to cover an unexpected emergency or the funds to buy a new car, a bank loan is one of the best ways to get the cash you need. If you are getting ready to apply for a loan, there are a few key things to keep in mind. Here are four important things to remember before you apply for your next loan.
#1. Your Credit Score Counts for More Than You May Think
Banks and mortgage lenders took a lot of heat for lowering their credit quality standards in the run-up to the housing bubble and the resulting collapse of the real estate market. As a result, many lenders are now taking opposite approach - steadfastly refusing to lend money to all but the most creditworthy borrowers.
If you have not applied for a loan recently, you may not realize just how important your FICO score and credit history have become. Before you apply, you will want to review your credit profile carefully and dispute any errors you find. You will also want to know your FICO score and look for ways to improve your standing if you can.
#2. A Preexisting Relationship with the Lender Can Ease the Way
If you have a relationship with a local bank or credit union, that should be the first place you turn for the cash you need. An existing banking relationship can go a long way and make the loan application process a lot easier.
That does not mean, of course, that your credit score does not matter to your local bank loan officer. You will still need to meet the underwriting criteria and show that you are a good credit risk before the bank will give you the loan you seek.
Banks and mortgage lenders took a lot of heat for lowering their credit quality standards in the run-up to the housing bubble and the resulting collapse of the real estate market. As a result, many lenders are now taking opposite approach - steadfastly refusing to lend money to all but the most creditworthy borrowers.
If you have not applied for a loan recently, you may not realize just how important your FICO score and credit history have become. Before you apply, you will want to review your credit profile carefully and dispute any errors you find. You will also want to know your FICO score and look for ways to improve your standing if you can.
#2. A Preexisting Relationship with the Lender Can Ease the Way
If you have a relationship with a local bank or credit union, that should be the first place you turn for the cash you need. An existing banking relationship can go a long way and make the loan application process a lot easier.
That does not mean, of course, that your credit score does not matter to your local bank loan officer. You will still need to meet the underwriting criteria and show that you are a good credit risk before the bank will give you the loan you seek.
#3. It Pays to Shop Around
Interest rates change all the time, and so do the criteria banks use to set them. No matter how good the deal your local bank is offering, it is important to shop around carefully.
The bank holding your checking or savings account is a good place to start the search for a loan, but it should not be the only place you check. Once you have their rate as a baseline, you can shop around at other local banks, national banks and credit unions. Shopping around could save you a lot of money, or at least reassure you that you have received the lowest interest rate possible.
Interest rates change all the time, and so do the criteria banks use to set them. No matter how good the deal your local bank is offering, it is important to shop around carefully.
The bank holding your checking or savings account is a good place to start the search for a loan, but it should not be the only place you check. Once you have their rate as a baseline, you can shop around at other local banks, national banks and credit unions. Shopping around could save you a lot of money, or at least reassure you that you have received the lowest interest rate possible.
#4. Lengthening the Loan to Lower the Monthly Payment is a Bad Idea
Whether you are applying for a personal loan or borrowing money to buy a new car, you want to keep your monthly payment as low as possible. Even so, lengthening the loan term in exchange for a lower monthly payment is probably not a good idea.
No matter what type of loan you are interested in, the longer the term the more interest you will pay. The higher the interest rate the greater the damage will be, but lengthening the term on even a low interest loan is generally not a good idea.
No matter what you need the money for, taking out a loan can help you bridge the gap financially and make the most of the funds you have available. As with any financial decision, the more you know about the loan application process and the factors that go into it, the easier it will be to get a good deal. Knowing what to look for, how to shop around and where you are from a credit standpoint will all help you get the best deal on the loan you need.
Whether you are applying for a personal loan or borrowing money to buy a new car, you want to keep your monthly payment as low as possible. Even so, lengthening the loan term in exchange for a lower monthly payment is probably not a good idea.
No matter what type of loan you are interested in, the longer the term the more interest you will pay. The higher the interest rate the greater the damage will be, but lengthening the term on even a low interest loan is generally not a good idea.
No matter what you need the money for, taking out a loan can help you bridge the gap financially and make the most of the funds you have available. As with any financial decision, the more you know about the loan application process and the factors that go into it, the easier it will be to get a good deal. Knowing what to look for, how to shop around and where you are from a credit standpoint will all help you get the best deal on the loan you need.