When weâ€™re considering taking out a loan, thereâ€™s a lot that goes into the process both in decision making as well as the applications. It can be hard to select a lender that we want to work with, and thatâ€™s without even mentioning the differences in interest rates and all of that. To say it gets complicated is kind of an understatement.
Thatâ€™s why weâ€™re here today â€“ weâ€™d like to explain some of the ways that we can make taking out a loan easier. Now, this wonâ€™t be a comprehensive list, mind. Rather, these are just a few things that youâ€™ll want to keep in mind as youâ€™re thinking about applying for loans, especially if youâ€™re trying to find the best of the best!
Before we get started, considering checking out a resource like this one: https://www.businessinsider.com/personal-finance/how-to-get-a-personal-loan. This can help us to get a sense of the different types of loans as well as some of the options that are out there as far as lenders and even regulations surrounding credit agreements. Weâ€™ll be focusing on other aspects today.
One: What are You Using the Money For?
While it may seem silly for this to be our first tip, itâ€™s definitely worth covering. Hereâ€™s the thing â€“ itâ€™s probably not a good idea to go into a loan without having a firm grasp on what your aim should be. Therefore, one of the first things youâ€™ll want to ask yourself is this: what are you intending to use those funds for?
Ideally, this should go beyond a simple â€œwell, Iâ€™m buying a houseâ€ or â€œIâ€™m going to pay for my vacation with a personal loan.â€ Rather, come up with a detailed strategy that involves specific NOK amounts (or whatever currency you intend to borrow in). That way, you have something to provide to lenders when they ask you this question as well.
Two: Figure Out What You Can Afford
Letâ€™s face it â€“ itâ€™s very easy to just submit a ton of applications for loans without giving it much further thought. Unfortunately, this isnâ€™t exactly the best strategy to take. Instead of going this route, we should carefully examine our finances before we submit any applications.
This way, we know how much wiggle room is in our budgets for things like down payments or repayments, depending on the sort of loan youâ€™re applying for. Budgeting isnâ€™t always fun, but it is pretty important to do, especially in these circumstances.
Three: Limit Your Applications
As we mentioned above, there are a lot of lenders out there. It can be tempting to submit applications to all of them that you see. However, itâ€™s usually a better idea to only submit to a select few financial institutions instead. Why is that?
Well, each time that you apply for any type of credit agreement (especially credit cards), the lenders will check your credit score. This can be in the form of a â€œhardâ€ or â€œsoftâ€ inquiry, and both will deduct points from your credit score. You can start to see why itâ€™s better not to have a bunch of those happening at once.
Four: Decide Whether You Want a Secured or Unsecured Loan
There are a lot of different categories of loans. One metric often used to define them is this: secured versus unsecured. Essentially, itâ€™s the difference between whether there is collateral or not. Itâ€™s hard to say which is â€œbetter,â€ truthfully, but there are positives and negatives for each of them.
When you get a secured loan, it means that if you canâ€™t make your repayments, whatever the collateral is can be seized by the bank. However, you will also likely end up with lower interest rates. Meanwhile, unsecured loans donâ€™t have the collateral for us to deal with, but they tend to have much higher interest rates in turn.
Itâ€™s up to each of us to decide what will be best for our specific circumstances. Hopefully, youâ€™ll have an idea of which option youâ€™re going with before you submit any applications, since that can really help your chances.
Five: Consider the Size of Your Loan
Interest rates are at the center of most tips and tricks for loans, as youâ€™ve probably started to notice. For this reason, it should come as no surprise that the size of the loan will also play a pretty significant role as far as how much interest youâ€™ll be charged. Let us explain.
The larger the amount that you opt to borrow, the lower the interest rate youâ€™ll be charged. Although this might sound a bit strange at first, itâ€™s because the way that lenders make money from loans is by charging interest. The more that you borrow, the less they need to worry about that, so youâ€™ll be charged less in turn!
Six: Know Your Credit Score
As you start the process of borrowing, it probably is a good idea to be aware of your credit score. You can read more about them on this website, if you arenâ€™t already familiar. The higher your credit score, the better chance that youâ€™ll be approved for a loan in the first place.
Unfortunately, with lower scores, you have a higher chance of being rejected, or offered a credit agreement with less favorable terms. Donâ€™t let this discourage you too much, though â€“ there are still options available.
Seven: Be Ready to Provide Personal Information
Throughout the process, you will likely be asked to provide all sorts of personal details so that the lenders can be confident that youâ€™re able to pay them back. This will probably include your pay stubs, tax records, and even details on other debts that you currently have. Having all of that prepared ahead of time can help speed things up along the way.
Eight: Shop for Lenders
Another easy trap to fall into is that you need to apply with the first lender that you see will accept your credit core. Thankfully, this really isnâ€™t the route that we need to take. Instead, we can take our time to examine a wide variety of creditors. Shop around and see what the best interest rates and repayment options are!
Nine: Know the Waiting Period
When you apply for a loan, most of the time you wonâ€™t get a response on it immediately. One of the only exceptions is same-day loans, but even then, this isnâ€™t a guarantee. Be patient and try not to apply for the same loan within six months.
The typical turnaround time is a week to a month, though that can vary. Look into the financial institutions that youâ€™re applying to and see what the average times are for them. You can ask your customer service agent about it, or simply check some online reviews. The important thing is that youâ€™re probably not going to immediately get money from a reputable lender, as theyâ€™re more careful about lending.
Ten: Borrow Responsibly
Perhaps the most important tip that weâ€™re offering today is this one. Never borrow money that you know you canâ€™t afford to pay back. Thatâ€™s just one facet of responsible borrowing, though.
You should also keep in mind the fact that there are plenty of options out there, so itâ€™s important to do your research on the lenders youâ€™re considering. As we mentioned above, try not to just accept the first offer you get. It may not be in your best interest.
If thereâ€™s a deal out there that seems too good to be true, thatâ€™s probably because it is. As long as youâ€™re exercising caution and not diving headfirst into every single credit agreement that you see, you should probably be fine. Hopefully, this list of tips and tricks will be helpful the next time youâ€™re aiming to apply for a loan, no matter the type.