If you’re looking to apply for a loan (or if you’re trying to do something like refinance a student loan), there are things you should understand to help you get a loan with the best terms. This information is necessary for your awareness and interactions with the lender.
Coming up to speed with the most important details controlling credit to leverage it to your benefit. You may already know your total income and expenses are variables that are considered when applying for a loan.
However, there are other things affecting your chances of getting approved for a loan with favorable terms.
Credit History
Having a good credit score shows lenders you’re able to responsibly handle credit. Specifically, by making on time payments and managing your levels of credit.
This will increase your chances of getting approved for a loan. If you’re among first time borrowers, it might be difficult to secure a loan at some institutions, but that is not to say your chances are null.
Once you’re approved for the loan, you should strive to make repayment on time as this will be reflected in your credit score and will definitely affect your qualification to get awarded credit in future.
Make sure you have a solid repayment plan and always borrow an amount you can comfortably repay.
Assets and Liabilities
In addition to your credit score, the lender may review your assets and liabilities. The lender will what to know your net worth and cash flow as this could be used to indicate your ability to repay credit.
Assets are items you own that have extrinsic worth. Assets can be readily converted into cash through selling.
In some cases, lenders will ask for assets to use them as collateral when you apply for a loan.
A loan is a type of liability. When you have many other liabilities the lender may be reluctant to provide you with a loan above a certain amount as your ability to repay is not guaranteed.
Therefore, make sure to clear up all or most of your liabilities as these could hamper your chances of getting approved for a loan.
Penalties and Fines
Failure to repay your loan on time wiill incur some penalties. At a minimum would be additional finance and interest charges.
You can minimize the impact by approaching your lender to negotiate alternative payment terms that could give you an easier repayment plan over an extended period of time.
Don’t wait until your loan is in default as this will also damage your credit history. Which means you may be denied credit in future by other lenders based on the information available about your repayment habits.
When seeking credit, you must understand the most important things about the whole process. Different loans will allow for different amounts of credit.
