Dos and Don’ts When Applying For A Loan

Nov 23, 2020

When you hit financial struggles in your life, one of the easiest ways to get by is through acquiring a loan. Loans can be a lifesaver when you find yourself at the bottom or when there is something major you want to purchase but you don’t have the means to make a big one-time payment.

However, an important thing to note is that loans are not accessible to everyone. Every type of loan comes with its own kind of requirements, based on its nature, your history, and the loan terms. No matter how badly you want to get the funding you need, there’s always the risk that you won’t receive good news.

If you’re feeling worried, don’t fret. We’re here for you! Before you send out that loan application, read through our list of dos and don’ts to help you get a better chance of approval.

  1. DO shop around and compare options. – Applying for a loan means involving yourself in quite a large amount of money. It is a simple decision that has the power to influence the quality of your life in the near future. It’s also why you should be careful on who you will partner with. It can be easy to go the traditional route and the first bank you know, but there are better alternatives that might be able to give you a better deal. Try studying a few options, compare their rates, and evaluate their services before making a final choice.
  2. DON’T make large withdrawals nor deposits to your bank account. – When you apply for a loan, you will be asked to present your recent bank statements. Having unusual transactions like a huge deposit will only raise a red flag instead of showing how well off you are. Your bank statement is a reflection of your current financial state and credit reviews will look into averages instead of huge differences.
  3. DO weigh in on your assets. – When establishments are lending you money, some of them ask for a collateral as security. Some don’t, but it can be helpful to have something handy. For secured loans, the collateral can lower the interest for the borrower, at the same time, it also lessens the risk for the lender. Now, it can be helpful to list down some items or properties of value that you have. Assets can range from jewelry, cars, real estate, or a boat.
  4. DON’T miss payments on existing loans like credit cards or car payments. – As a borrower, you are defined by your credit score. So, you must be on your best behavior around all of your financials. As lenders work with credit rating establishments to help them decide if you are worth the risk, you must keep extreme care with regards to your payment history. According to experts, your payment history has the majority of control over your credit score. So, avoid missing payments. Not only do you have to pay penalty fees, you also face the threat of being declined for a loan.
  5. DO discuss the best repayment period for your loan. – As mentioned in the previous tip, staying in schedule for your payments prove your credit worthiness. This means that in order to better pay for your loans, the best option is to get the repayment amount be something you are comfortable with and won’t overwhelm you. Some people get the image that a shorter loan tenure is the easiest way to complete a loan and it saves them on interest. However, a longer tenure will allow you a more manageable payment schedule, so you can stay on top of them better.
  6. DON’T submit multiple applications at the same time. – A loan application does not work like a raffle where more entries you send means more chances of winning. Every time you apply for a loan, a credit rating organization is notified. Each notification means a hit on your credit score, so imagine what 10 applications would entail. Basically, lenders also do credit checks to see if you applied in other loan applications you have completed. If they’ve seen you have been rejected quite a few times, there’s a really high chance they will do the same.
  7. DO save as much as money as possible before attempting a loan. – Loans are never a sure thing, and even if they are, some acquisitions would still require you to make a down payment. The more cash you have stored that you can use should there be extra expenses. Not only will that, but having a steadily growing savings account help you gain approval.
  8. DON’T ignore the fine print. – This is a rule you should apply in everything that you do, not only with your loan applications. Don’t let your desire to gain approval on a loan hinder you on carefully going through everything you are signing up on. The terms and conditions of your loan will explain to you additional charges, which may include pre-closure fees, processing charges, admin fees, check penalties, extension charges, or late payment fees. This allows you to become more knowledgeable with this new venture you’re planning to explore.

A Smarter Choice Is The Best Choice

By following these tips, you will be able to find the correct kind of loan that is aligned with your requirements. By taking some time, you will make more intelligent choices and you will be better in dealing with repayment.

Consider your loan options with We are a P2P funding platform that gives people quick access to loans, with different types to choose from depending on your credit rating and your needs.