There are times when we don’t have enough money for our needs. It could be a sudden need such as an emergency, or something big like budget for a home renovation. You might also want to go on a vacation but don’t have enough budget to make it come true, or want to make a big purchase like a car or property. Whatever reason it is, having a lack of money should not be the reason to stop you especially if you really need it. This is when loans come in really helpful.
If you need additional budget or quick cash to meet your current needs, getting a loan is one of the quickest solutions to your problem. There are plenty of loan types to choose from depending on your needs. For instance, if you need financing for a new home, a house loan is best for you. However, for other purposes such as a vacation or buying something, you could apply for a personal loan instead. If it’s your first time getting a loan, here are the basic things you need to know first.
Credit History and Credit Score
Your credit history and credit score greatly affect the chances of your loan application to be approved. Good credit means that you are paying your obligations on time and don’t have issues when it comes to settling your accounts. If you have good credit, lending companies would trust you more and approve your application. If your credit doesn’t look that good, it is best not to apply for a loan but improve your credit first. You can do this by settling all credit balances, asking for higher credit limit and pay obligations on time.
Your income determines your ability to pay off a loan. When you’re applying for a loan, you’ll need proofs of your take-home income such as pay stubs or tax returns to show the lender your capacity to pay. Your income doesn’t only refer to your primary source but could also include side-jobs, spouse’s income, and other sources.
Employer’s Contact Information
Lenders typically ask for your current or past employer’s contact information to verify some information about you such as your income and employment dates. They will serve as references to know that the information you provided is accurate and you are eligible to get a loan.
Net worth refers to your assets minus the liabilities. This is one of the basic factors’ lenders look into when deciding whether to approve a loan application or not. Assets refer to everything you own that has value such as properties and investments.
On the other hand, liabilities refer to your financial obligations such as debts and mortgage. To keep your finances in check, it is important to calculate your net worth and how the new loan would affect it. You’ll know whether you could still afford to have a new loan or not.
Once you know the basic information, you would easily know your way around loans and how to apply for it.