Before you apply for a loan, a question you have to ask yourself is whether you can indeed borrow the money from a bank. Knowledge of what details the banks look for when you borrow from them is quite important. This is because it not only increases your chances of approval but also saves time and money.
Whether you qualify to borrow or not, understanding the details that determine the success or failure of your loan application will only strengthen your claim on a loan the next time you apply. Below are some of the common types of yahoo.comloans you might require in the future:
- Overdrafts- are usually small amounts that you might need in case of emergencies
- Credit cards
- Personal Loans
- Home loans
- Vehicle loans
These are a few but the more common types of the loans people often apply for. Am I eligible to borrow money, is a quite popular question among many people. While every type of loan you want will have different criteria for determining your eligibility, this post will be more focused on personal loans.
Regardless of whether it’s the bank or other lenders, many research factors are taken into account to determine if you can borrow money. The good news is that most of all these factors are in your control. You just have to understand how they affect your borrowing.
1. Credit Score
This factor carries a lot of weight on not only determining if you are eligible for a loan but also your loan rate. This is a strong factor and thus, you should ensure that you build it with time and maintain it in a healthy state. A good practice is to regularly order your credit reports and analyze your progress while also checking for errors.
2. Current Income
Debt-to-income ratio is another factor that lenders take into consideration. A good scenario most lenders are looking for is where your monthly debt payment should account for less than 43% of your income. This is to ensure that you are a low-risk customer. All financial obligations are taken to account including child support, monthly bills, among others.
3. Repayment History
This is a factor that greatly affects your credit score as lenders take into account if you have any unsettled debts stretching out far beyond the due date of payment. Records of late payment can prove to be your undoing as they can really damage your credit score. Hence, ensure that you complete payments as early as possible as this will make you more eligible to borrow money from a bank.
Other factors affecting your loan eligibility
Most banks will use your employment history as proof that you are able to repay a loan. While lenders can conclude you are a risk mostly if you are self-employed, you can still be eligible by providing more information to show proof that you have a reliable income.
Other factors include your age, the length and type of relationship with the bank, the type of loan and what are your intentions with the loan. A large amount of money may be a higher risk to the lender as opposed to a lower fee.
After borrowing money you need to devise a plan on how to pay early as late payment may jeopardize your ability to borrow another loan.