Let’s face it, getting a loan these days can be pretty tough, if you don’t have all of your ducks in a row. Having recently gone through the process myself on a variety of fronts, I understand what it takes to get our loan finalized. If some time has passed since getting a loan, here a few tips to improve your chances.
Do You Need The Loan?
This seems like an obvious question, but not many people consider this when starting the loan process. do you absolutely need this loan? List all the pros and cons for securing this loan and then move on from there.
Can You Afford It?
Before embarking on the loan approval process, consult your budget and make sure that you can afford the monthly payment. Sometimes we just run towards needing a loan without considering whether or not we need it and how the loan payment will impact our monthly budget.
Check Your Credit
This is another obvious tip, but you don’t want to get all the way to filling out the application, only to be denied due to a phantom credit issue. Have you seen the credit score commercial where there’s the one score that’s 150 points lower than the other scores? Yea, that one. Don’t do that. Check your credit and make sure that you meet the minimum credit score requirements.
Depending on the type of loan, the minimums tend to run between 620-680. Obviously, the higher, the better. The golden gates for better rates tend to open for scores over 700.
Call Potential Lenders
Call lenders you may be considering and talk to the loan representatives. Make sure you talk to someone who is really insightful and not just reading from a script. Ask the following questions:
- What is the minimum credit score needed to qualify?
- What debt to income ratio are you looking for and using to qualify the loan (this is where you check your budget to make sure that you are within their guidelines)
- How long does it take to close the loan?
- What documents will you need to support the loan application?
- What will my monthly payment be?
- What are the available loan terms?
- Do I need collateral?
- How much of a downpayment is required?
- Ask other questions, specific to your situation- If you have a recent or discharged bankruptcy you may want to ask how that will impact the approval.
A good representative will engage and answer these questions for you in depth as it relates to your situation. Don’t apply without getting answers to these questions. Another tip is to go with the the lender with whom you’ve had an extended credit relationship. That is, you’ve entered into an agreement with them in the past for a loan and fulfilled that obligation with little to no issues. This is helpful because you have an established track record with them which helps the underwriter feel better about granting you the loan.
Understand the Market: How Have Things Changed And What Are Lender Concerns
The loan market has changed drastically over the last 5-7 years. Ask your lenders and underwriters about red flags they may be looking for on an application. Believe it or not, lenders look for for things that are not listed on your credit report. Ask questions to make sure that you’re not carrying a red flag on your application.
For example, depending on the type of mortgage, many lenders have reverted to making 20% down the standard requirement. They have also started being more conservative on debt to income ratios which makes sense given current market conditions and the resulting job instability for many potential borrowers.
Enter Weemba: Connecting Borrowers And Lenders With A Social Twist
Weemba connects people like you and I who many be looking for a loan for a specific reason. Unlike other professional lending situations, Weemba makes this process personal by allowing the borrower to list their request as a project which details all of the personal reasons why the loan should be granted.
The tool is fairly self explanatory and easy to use. Upon signing up, you’re able to list and detail the reasons you want the loan and you can also upload documents to support your case, though lenders can’t see this information without your approval.
Loan projects vary and as intended, very personal. They tend to range from the standard mortgage request to auto and student loans with personal loan requests listed as well for a myriad of reasons.
In my experience so far with Weemba, the difference between them and traditional loan vehicles is the personal side which enables borrowers to detail why they want the loan and to add information that lenders typically wouldn’t see. This can be good or bad depending on the situation so I would encourage borrowers not to reveal too much.
For example, if you’re already saddled with consumer debt, then you probably shouldn’t be requesting a loan for the purposes of buying a motorcycle.
At the end of the day, it boils down to the numbers working out in the lenders favor. That is, you being able to repay the loan without incident. So be sure to detail your loan project in a fairly positive light and make sure that your credit score (Equifax) is up to snuff.