What Do You Have To Do To Get A Loan?

Although the banks have promised to start lending again it appears that many lenders are still operating a tough approach to requests for loans, it can seem like an uphill task to get an application for finance authorized.

However, knowing the criteria that banks pay most attention to and how to make a request for credit look more attractive can improve the chances of getting approved.

Bank underwriters are cautious and when they assess applications for loans, they tend to view any kind of changes warily. It is therefore never a good idea to make sweeping lifestyle changes just before making a loan application.

Thinking of moving house? Whilst that in itself may not be sufficient to get an application refused, being a long-term resident in a dwelling will help to bump up the number of points on your credit file.

Likewise, if you are considering quitting your job or going self employed, opting to make the change just before a loan application is likely to be viewed dimly and will seriously hamper any chances of getting credit.

Underwriters like to see stability and a sturdy and unchanged financial record when considering loans. It is therefore essential to avoid trying to acquire too much credit within a short space of time, even if all the applications are approved, as this could act as an indicator that you are in financial difficulty and potentially overloading yourself with debt.

Even once a loan is agreed in principle from a bank, many will need to see documentary evidence of key facts, especially if they are not your usual banker.

If the bank who you have applied to holds the account where your paycheck gets credited and you managed your bills, you may be asked to provide less documentary evidence, as the bank already has knowledge of your finances.

For banks providing loans who have no prior knowledge of the applicant, it is usual to ask for a number of documents to verify the statements made on the application. The type of documents usually requested include items such as paychecks, bank statements and copies of utility bills.

Whilst it can be more convenient to stick with the bank that you hold your main account with, for the sake of providing a few extra documents, you could miss out on a much cheaper credit agreement.

It is therefore always worth checking the market to see whether any banks have incentives to attract new customers for credit. This is one instance where staying loyal really doesn’t pay.

If the interest rates seem extortionate, some banks may be willing to negotiate if you are able to offer collateral, as banks far prefer some kind of security for a loan and this can unlock the door to cheaper repayments.

Along the same lines, if your credit is less than perfect, it may help you get cheaper repayments if you have a close family member who would be willing to act as a co-signature on the account.

However, loans taken out on this basis reflect on both parties’ credit ratings, so it is essential that the co-signer understands the full implications before agreeing to help out.

To summarize, it is possible to get loans at a reasonable rate but to do so, an applicant must prove to the loans underwriter that they do not present an adverse risk and are unlikely to act in a volatile and unpredictable manner.

One good test to try out privately: if you were giving out loans from your own personal money and saw your application….would you agree to provide the cash? If the answer is no, then it’s time to clean up your credit

This has been a guest post from Money Supermarket.

A Loan in Shining Armor (and other stories)

In difficult economic times, most people are tightening their belts and restricting their spending to absolute essentials…that is of course, providing you consider a suit of armor an essential requirement.

When applying for a loan, the lender generally asks the reason for the finance, expecting to be told the money is for home improvements, a new auto or possibly to cover the cost of getting hitched.

In recent times, some people have asked their bankers to provide the collateral for them to undergo cosmetic surgery, with boob jobs and liposuction commonplace.

However it seems that not everyone opts to borrow money for such mundane purposes as a glimpse into the banking world has revealed a plethora of weird and wacky reasons for the request for cash.

Many of the cheapest loans on the market would not be available to those wanting funds for less standard reasons but it seems the increased cost did not deter people from applying.

One of the oddest motives for getting hold of more ‘moolah’ was the apparent need to purchase a suit of armor, not an everyday requirement for most people. The would-be knight was not going for the cheap Wal-Mart-option either, the armor was clearly of the designer kind at around $8000.

Everyone knows that foreclosures are on the increase and rental costs are rising, but this still doesn’t quite explain a $32,000 request to turn a dark and dank cave into a des-res.

Animals appear to feature quite heavily in the banking world’s list of less common reasons for finance and not just to buy a pedigree pooch.

Apparently to purchase a camel, an individual would need to borrow around $24,000 whilst a black stallion would cost $16,000. A Bengali tiger was also considered desirable accessory by another applicant.

The longing for a different lifestyle prompts some to approach banks hoping for the cheapest loans, with one infamous individual brazenly telling the salesman that she wanted to win an online auction to date a well-known footballing star.

People who wanted to ensure they left a mark on the world but didn’t have the money to live their dreams also resorted to loan applications to fund their fantasy.

In this particular example, the ultimate thrill was not sailing round the world, experiencing a trip to space or exploring the far flung corners of the globe…it was the ambition to bake the world’s largest cake.

Another hopeful applicant wanted to build a top-notch automaton so he could win the TV show, Robot Wars.

A 40 year old man in the UK wanted the chance to live out one of his unfulfilled childhood dreams and planned to use the loan money to travel to the US to meet Mickey Mouse.

Some motives for requesting funds were far more practical, if somewhat surreal. Wanting the opportunity to live forever is a hope that a lot of people share, but one loan applicant wanted to borrow the funds to secure his place in a cryogenics program so that his body could be frozen in time.

Whilst many of these reasons may sound funny and no doubt led to the loan being declined, it makes you wonder how many individuals tell lies about the real reason they want the money, just to ensure they qualify for the cheapest loans possible and get the cash agreed.

This has been a guest post from Money Supermarket.

Student Loan Payment Countdown!

The 20th is the day that my wife’s student loan payments come due.  We have them automatically deducted from our checking account.

One of the payments is within striking distance of being paid off.  When we got married, it was the ‘larger’ of two loans, as it had the larger balance, the larger monthly payment, and the larger interest payment.  We aggressively worked to pay it down, applying ‘extra’ money that we came across at various points (including portions of our tax refunds, an inheritance, and my wife’s income while she was working) to bring the balance down.

In January 2009 it actually became the smaller of the two loans from an outstanding balance perspective, which was a great milestone.

We are now on track to have this paid off by the end of the year.  The December payment will bring the balance down to $0!

That will free up approximately $200 per month in payments.  We had originally planned on applying this balance towards the second student loan, which would allow that balance to be paid off around the end of 2012.

We are currently re-thinking this strategy.  Instead, we plan to just spend the money frivoulosly each month on electronics, video games, clothing and music downloads.

Cool, right?

Just kidding!

That’s totally not what we’re doing.

We are going to apply the $200 towards debt.  We may, however, apply that toward the mortgage instead.  The mortgage and the second student loan payment are the only two debts we’ll have.  The mortgage has a larger balance, a much larger interest rate, and while it won’t bring our payoff anywhere near 2012, it will eat the balance away a lot quicker than the student loan payment would.

In other words, it’s the instant gratification (well, as much instant as two years can be) or the more bang for your buck.  We still have a few months to make a decision on what to do with the ‘extra’ funds, but either way, we’re committed to applying the entire amount to debt once this particular loan goes away.

Any thoughts?