When it comes to applying for a loan, we expect it to be a straightforward process since most of us will undertake this task sometime during our lives, whether it’s applying for a business loan, personal loan or a mortgage.
However, this is rarely the case, and as applicants embark on this journey, many will soon realise that their preparation is just the tip of the loan application iceberg. There are many things to consider when applying for a loan, making the process somewhat intimidating, especially for the first-time applicant. Therefore, this article will help relieve stress by providing 12 useful points to consider.
Here are 12 things you need to know when applying for a loan:
- Loyalty: Being loyal to your primary banking institution does not equal a better offer on your loan. So don’t be afraid to search the market and talk to different lending institutions about their loan products.
- Best deal: By default, the bank will offer you their standard loan products without any discount. However, if they know you’re also searching elsewhere, they will most likely offer you their best deals. Therefore, when you approach the bank, make it clear to them that you are still actively searching the market and comparing the prices from different lenders to find the best rate.
- Just ask: Most of the time you can get a better loan deal by just asking for it!
- Add ons: It’s a common practice for the bank to sell you a bundled solution which often consists of an everyday bank account and credit card in addition to your loan. In this case, you need to understand your overall financial situation before committing to the offer so that you don’t end up paying more for products that you don’t need.
- Restrictions: Some loans have restrictions towards specific criteria like property size, high-density building and location. So make sure you have a good understanding of the asset you’re looking to fund. For example, if it’s a house, then have a rough idea of the suburbs you’re interested in, and if it’s a business, then knowing the estimated size of the premises will be beneficial. Having this information will allow you to ask the essential questions about each loan products to ensure that they’re right for you.
- Seek Professional Advice: Keep in mind that employees at the bank are not trained to help you make financial decisions; they’re there to sell you their products. Therefore, before you sign on the dotted line, it is best to seek professional advice from a qualified financial advisor who can help you choose the right loan based on your circumstances.
- Fine prints: When it’s time to compare the different loan products, make sure to pay close attention to the fine prints of the agreement. There might be small exclusions that can impact you significantly, or there might be additional costs that are not included in the advertised price. Reading the fine prints can save you the headache of committing to an agreement that’s not right for you.
- Spending History: The bank will assess your six-month spending history, including all your subscriptions. Make sure your spending does not exceed your income and that you don’t have an overdraft on your bank account. It’s also wise to clean out your subscription list and make sure they are still relevant. You might find that you’re paying for subscriptions you’re no longer using.
- Employment History: The bank will assess your employment history to see if you’ve held a job for at least 6 to 12 months. This will indicate the stability of your income and determine your ability to cover essential ongoing expenses such as bills. Therefore, if you’re new to the workforce, it’s best to wait at least 6 months before approaching a bank for a loan.
- Credit Score: The bank will check your credit score, which indicates your ability to pay back debts. A good credit score shows that you can make regular, ongoing repayments promptly. On the other hand, a bad credit score will raise a red flag against your application. It’s essential to speak to a qualified financial advisor and get your credit score under control before approaching the bank.
- Automated Assessment: A Bank Manager does not assess your application, instead it is put through an automatic system which evaluates your eligibility. Take the time to make sure all the information on your loan application are recorded clearly and accurately before submitting.
- Credit marks: It is smart to do your research and speak to multiple lending intuitions. However, submitting too many loan applications can harm your process. Every time you submit an application, the bank will do a credit search which will be recorded on your credit report. Having multiple credit checks can lower your credit score. Therefore, it’s best to pick only a couple of banks to approach for a loan.
Armed with these 12 points and all the other research and preparation you’ve done, you can now approach your bank in confidence, make informed decisions and get the best deal for your loan.
If you require assistance with your loan application process, the team at FutureNow Finance are here to help. We can help assess your current financial position and guide you through the home loan application process. Call 1300 013 730 or email firstname.lastname@example.org