It might seem easy sourcing out a money/loan lender whenever you find yourself in a financial fix. But have you ever felt disappointed when they reject your application? If yes, do you take time to figure out what could have gone wrong? Just the same way you can’t lend your money to every person in your circle of friends, these institutions can’t simply say yes to every application.
They have criteria they use to decide whether borrowers are worth the risk or not. So instead of waiting to be turned down, why not try to assess yourself first. That way, you can put your best foot forward and increase the chances of receiving the much-needed loan. But, how?
Here are a few tips to help you get started.
Your financial character
Banks and other lending institutions, always want to know the character of their loan applicants. Here it doesn’t matter whether you’re kind or not out there. What matters is how seriously you take your financial commitments.
You can begin by asking yourself these questions.
- Do you normally repay your loans on time?
- How much credit have you used before and was it necessary?
- Do you default on bills or you pay early?
- Have you ever faced any bad debt judgment?
- When was the last time you made a credit inquiry and how many times before that?
And lastly, ask yourself if the answers to these questions sound like someone you can trust with your money.
Do you have collateral?
This is one of the most commonly used terms when it comes to loan applications. Lenders will always want to know how they can get their money back in case you decide to disappear and not pay. What type of security are you willing and already have to offer your lender over the loan they will be giving you?
Here, the most preferred kind of investors is properties. And of course, not every type of property is accepted here. Is the property you are offering as closely valued as the amount you’re applying for? And where is it located? If you aren’t an investor, then you can offer your home or car as collateral.
This article on car title loans with no credit check gives an insight on how car owners can use their car titles as collateral for quick loans. All this, without credit checks, while still keeping the car. But, how ready are you in overcoming various challenges such as meeting all the application requirements? The answer to this question will guide you in determining your eligibility.
Your financial capacity
Before lenders sign that loan application, they will first want to know your serviceability. What’s your monthly or yearly income? Are you self employed or a permanent employee? Do you have any other extra source of income? All of this will determine your viability. Remember they also have other responsibilities to meet and they depend on your loan repayments to conduct some of their duties.
Besides, the worst thing that could happen is you failed to pay and getting your assets confiscated. If you find yourself in a position where your financial capacity isn’t that pleasing, then you might have to work on improving it first before filling that application form. You can also use the mortgage calculator to see if you can comfortably handle the repayment schemes.
How much capital can you put down?
Before making any hasty application, ensure you know exactly how much money you will need. And this has to be in line with your monthly cash flow projection and deposit. In simple terms, it’s the combination of financial capability and collateral.
Do you have other assets apart from the ones you have placed as collateral? This is because most loans are offered in a Loan To Value ratio. The lower it’s, the easy it’s to get a loan and vice versa.
If you are applying for more money, you should have high capital, which means you have more assets that can be sold to repay it in case things don’t go as planned. And if your capital is low, then you leave the lenders narrow loan repayment recovery options, which means they can easily lose their money.
So take time to evaluate how many of the valuable assets you’re willing to sell and calculate their total monetary value. If the amount surpasses your intended loan application amount, then you’re in a good position.
The loan application process is long. But it can get frustrating if you follow all the process only to be turned down. You can save yourself from this by conducting a personal loan eligibility assessment. This way, you get to know your chances beforehand and maximize on that. Evaluate your four financial C’s; character, capacity, collateral and capital.