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5 tips in securing your loan

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Image: Screenshot / Kevin Raposo

Everyone needs extra money from time to time. Sometimes, it’s for a planned expense, such as a trip or buying furniture – and sometimes it’s for something unplanned – like a new furnace or a roof.

Whatever your need, you may be looking for a loan to meet these expenses – and there are five essential things to think about when you are looking to secure a personal loan:

  • Understand what types of loans are out there: You should research the various types of loan products that are out there so you can figure out which one might meet your needs. For example, are you looking to pay down credit cards, fund a trip or pay for a renovation? Are you interested in a secured loan, backed by the value of what you are purchasing? Or would you consider an unsecured loan, which doesn’t require you to put anything down to secure the loan. You might use an unsecured loan to pay down credit card debt, for example.
  • Check your credit score: Before even considering a loan, you should obtain a copy of your credit report. Your bank might offer a free credit monitoring service and can provide you with a report. Or the main credit reporting companies will offer you a free copy—or one for which you will pay very little. Review it to make sure it is accurate – especially if you have paid something off and it is still showing up on the report. In general, a credit score of 619 or 620 is considered good, and anything below is fair or poor. If your score is low, you might want to work on raising it before applying. It could save you hundreds of dollars each month in interest.
  • Look into online lending: Short-term loans of small dollar amounts, paid back within a few weeks, like online payday loans by Turbo, are part of a new wave of online lending platforms. These lenders use advanced underwriting methods to factor in any risk. Sometimes you can get instant approval, and in some cases, you can get your money the same day. You should make sure you have things like current pay stubs on hand, W-2s, and tax returns so your loan won’t be delayed.
  • Pay down small debts: Having small debts that you have not paid off can make it look like you are not likely to pay back a larger debt – thus you are a higher risk to lenders. Scrape together some cash, if you can, and pay off the debt, closing the account. It will increase your available credit usage and make you a more viable candidate for a loan.
  • Create a savings account: Lenders look at all your available assets when considering a loan application. If you can find a way to gather a small nest fund, it will show increased financial responsibility and improve your chances of getting approved for a loan.

Just be careful not to jump in too deep or too quickly – realize that sometimes a loan application takes time. And think about how much of a loan payment you can actually afford as part of your budget. However, by following these five basic tips you should be able to obtain the best possible loan to fit your needs.

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