Getting a loan is something that we all need to do at some point. Be it a loan to help ends meet, help you afford a college education, buy a new home, new car, or just to help you meet sudden expenses.
Whatever the case, there are few people in the world who never need to take out a loan. But, getting a loan is something else. It is not easy to get a loan, you need to understand how loans work, and not all loans or all lenders work the same way.
Personal loans in Washington DC will have a different application process to auto loans in Virginia. Different states, different lenders, and different loans all work in different ways.
So, how do you figure out your loan eligibility? There are a few ways, so let us talk you through the process of applying for a loan.
What Info Do You Need Before You Apply?
Before you start up your loan application you need to gather together all the documentation you will need for the process, have it handy before you begin the process.
You can move through the application process more efficiently and get your money faster if you have all this at the ready before you begin.
Here are some of the things you may need:
- ID. E.g. Social security, driver’s license, passport, etc.
- Proof of residence. E.g. named utility bill, lease agreement with name and address, etc.
- Proof of your income. E.g. tax returns, W-2s, pay stubs, etc.
- Information of employer. E.g. name of company, name of manager, phone number of manager.
Check Your Credit
Pretty much all lenders will do a credit check on you to get an idea of how likely you are to be able to repay your loan in full. Some online lenders look at alternative ways to collect this data, but most look at your credit score.
Personal loans are the most common type of loan, these will usually need you to have fair credit, at 580 or higher. Having good credit at 670 lands you a much better approval likelihood.
You can get a copy of your credit report online, and you will then get a free copy on an annual basis, this will show you how your credit standing is.
Having an idea of how your credit is doing will show you just how likely you are to get a loan, and what kind of loan you will get and how good your interest rate will be.
Even with a low credit score you can still get a loan, however, you may find your fees and interest rate to be a bit too high for the loan to be worth the trouble.
So, if you can try to improve your credit score prior to getting a loan.
What Options Do You Have?
Depending on how creditworthy you are, you may need to look at other options. For example, you might need a co-signer on some loans to get full approval with a reasonable interest rate. If you cannot find a decent co-signer, or if you are not allowed one, you still have options.
There are secured and unsecured loans. Even personal loans can be secured or unsecured.
A secured loan will have collateral in the case that you do not repay the loan, an unsecured loan does not have collateral. However, unsecured loans have higher interest rates, but secured loans can be lower, with the addition of collateral.
You should also shop around, some banks may be more strict if you have poor credit, but online lenders may be more friendly.
If you do not need a huge loan, you could consider community charities, family or friends assistance, and so on.
What Type Of Loan Do You Need?
Of course, all of this will depend on the type of loan that you need. Mortgages tend to be less of a hassle when it comes to being eligible than some other types of loans. Student loans are also usually a bit more friendly, but more of a pain to pay back.
Each loan will have different requirements for application, so it really does depend on what type of loan you are applying for.
Personal loans alone also have many uses, so the use can often also be considered in your eligibility. If you want a personal loan for debt consolidation, you may be more eligible for this type of loan than some others.
Know what type of loan you are after and what their requirements are.
Documentation
Each lender will be different with what you need to provide in order to apply. However, most of what will be needed is the same as you would need for any legal matter: proof of employment, proof of residence, and identification, proof of income as well.
However, this can differ. Lenders will inform you if they need documents, and how you get it to the person who needs to see it.
Just remember that the faster you provide this information, the sooner you will get a result.
