Whether you need money for home improvements or to buy a new home, banks and credit unions are available to lend you money. Of course, not everyone qualifies for a loan. Getting a loan often depends on your credit score and income. Before walking into a financial institute and completing a loan application, it's vital to educate yourself on the best ways to get a loan. This can improve your likelihood of getting approved, and it may result in a lower interest rate.
Get your credit report and score before applying for a loan. With this information you're able to evaluate your credit history and pinpoint any factors that may result in a denial. Your credit score determines whether a lender will extend credit. What's more, a low credit score results in higher interest rates. Maintain a good payment history. Pay your credit accounts on time each month to raise your credit score. And if possible, pay creditors before the due date.
Along with evaluating your credit history, lenders take your personal income and finances into account. They'll request employment information. If you don't have steady income or employment, you may not qualify for financing. Eliminate debts to lower your debt-to-income ratio, improve your FICO score and increase your disposable income. Low debt looks good on a loan application, and you'll appear trustworthy. Having a personal savings account and down payment can also improve your approval chances and help you acquire a lower loan rate.
Collateral and Co-signer
Depending on your credit history and financial situation, lenders may require collateral. This is essentially a piece of personal property used to secure a loan. To qualify, the dollar value of the collateral must match or be equivalent to the dollar value of the loan. Lenders accept different types of collateral such as a vehicle title, jewelry, electronics or equity.
If less-than-perfect credit makes it difficult for you to get a loan, consider using a co-signer. A co-signer is basically someone with good credit who promises to pay your debt if you're unable to fulfill the contract. In other words, they assume full responsibility for the debt. This is a dangerous situation for the co-signer. However, it benefits people who are unable to acquire financing on their own.