When we're considering taking out a loan, there'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 that's without even mentioning the differences in
interest rates and all of that. To say
it gets complicated is kind of an understatement.
That's why we're here today “ we'd like to explain some of
the ways that we can make taking out a loan easier. Now, this won't be a comprehensive list,
mind. Rather, these are just a few things
that you'll want to keep in mind as you're thinking about applying for loans,
especially if you'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. We'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, it's
definitely worth covering. Here's the
thing “ it'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 you'll want to ask yourself is this:
what are you intending to use those funds for?
Ideally, this should go beyond a simple œwell, I'm buying a
house or œI'm going to pay for my vacation with a personal loan. 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
Let's face it “ it's very easy to just submit a ton of
applications for loans without giving it much further thought. Unfortunately, this isn'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 you're
applying for. Budgeting isn'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, it'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
œhard or œsoft inquiry, and both will deduct points from your credit
score. You can start to see why it'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,
it's the difference between whether there is collateral or not. It's hard to say which is œbetter,
truthfully, but there are positives and negatives for each of them.
When you get a secured loan, it means that if you can'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 don't have the collateral for us to deal with, but they tend to
have much higher interest rates in turn.
It's up to each of us to decide what will be best for our
specific circumstances. Hopefully,
you'll have an idea of which option you'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 you'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 you'll be
charged. Let us explain.
The larger the amount that you opt to borrow, the lower the
interest rate you'll be charged.
Although this might sound a bit strange at first, it'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 you'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 aren't already familiar. The higher your credit score, the better
chance that you'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. Don't let this discourage you too
much, though “ 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 you'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 isn'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 won't get a
response on it immediately. One of the
only exceptions is same-day loans, but even then, this isn'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 you'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 you're probably
not going to immediately get money from a reputable lender, as they're more
careful about lending.
Ten: Borrow Responsibly
Perhaps the most important tip that we're offering today is
this one. Never borrow money that you
know you can't afford to pay back.
That'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 it's important to do your research on the lenders
you'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 there's a deal out there that seems too good to be true,
that's probably because it is. As long
as you'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 you're aiming to apply for a loan, no matter the type.
