Many instances arise in life when we need to utilize a loan from a financial institution, such as when we want to buy a property, start a business, or purchase a car or another big-ticket item. However, trying to work out where to go to apply for a loan and which option might be the best can be daunting. It helps to follow a few steps to finding the right loan for you.
Know What You Want to Borrow the Funds For
Start by knowing exactly what you want to borrow the funds for. For example, do you want to get a loan to start an online business or buy your first home, or perhaps go back to school and pay for further education? You may want a short-term loan to help tide your business over during a period when you need to invest in a lot more stock or an expensive piece of equipment.
Or, you might want to borrow funds to take advantage of the equity in your property and use the money to renovate or extend your home. Perhaps you want to utilize a debt consolidation loan to try and get on top of the interest you’re paying on money you owe on multiple credit cards and personal loans elsewhere. There are many reasons why people want to apply for a loan, so ensure you know exactly how you’ll use the funds, in as detailed a way as possible, so you know how to identify suitable lending products.
Clarify How Much You Need to Borrow
You also need to be specific about how much you need to borrow and, thus, what type of loan you might need and which lenders to approach. Keep in mind that financial institutions will ask you exactly what dollar figure you’re looking to borrow, so you can’t give them a vague amount.
It’s always best to apply for as little as possible, as the lower the amount you want to get a loan for, the more likely it is you’ll get approved by the lender. Some people do themselves a disservice by asking for a high amount just to see if they can get it and then plan to work out how to use the funds later, but this doesn’t help your case with those who want to be sure you’re able to pay them back.
Research Different Providers
A crucial part of finding the right loan for you is doing your due diligence and researching the various lenders offering funds these days. While it might be tempting only to approach the bank you currently have an account with or the one close to your home or work, they may not have the best offers for your needs.
Instead, consider a variety of banks and other lenders, both those you can approach in person and those who run online only. Many quality online loans are available, many of which offer customers lower rates because they have reduced overheads by not running physical branches.
You’ll also find that there are financial institutions specializing in lending to specific types of clients, such as those in certain industries or needing small or large loans, etc. It’s wise to examine all the options as you may find that the best one for you is one you’d never have expected.
Don’t forget to ask about less obvious factors, too, such as the possible terms of loans, what type of customer service is offered, and if loans can be paid out early without having to pay high cancellation costs. Plus, determine if you can utilize online banking to make payments and if there are other services worth knowing about. Look into both variable and fixed-term options, too, and read the fine print on loans before signing any contracts.
Get Your Paperwork in Order
Another way to find the right loan is to get all your paperwork in order before you start approaching lenders, so they’re more likely to find you attractive as a customer and will offer better options to you in turn. You’re also increasing your chances of being approved by the lender(s) on the top of your list if you provide them with all the necessary paperwork from the get-go, showing you’re organized and financially savvy.
For instance, depending on the loan you want, you’ll have to show personal or business tax return records, a financial or business plan, asset and liability lists, cash flow statements, balance sheets, and financial projections. Put together bank account statements and your proof of identity documents, too.
Before you select a loan, think about your short-term versus long-term financial position and goals, and ensure you really do have to get a loan. The better prepared you are and the more steps you follow from this list, the better your chances of finding an excellent loan product for your needs ASAP.
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