For most people, applying for a loan means filling out the form, firing it back at the lender and praying for a positive outcome. Which is, quite frankly, far from proactive.
From smaller personal loans to larger business loans to major loans for property investment and development, it pays to be proactive. So to ensure yourself the smoothest process and best possible result with every application, here’s a quick rundown of six things you should be asking yourself when applying for any type of bank loan:
- Am I likely to qualify?
First up, you need to be realistic as to whether you’ll qualify. If the likelihood is low, you might not want to bother. Rejected loan applications have the potential to inflict real and lasting damage on your credit score. If rejection is a very real possibility, it’s worth considering alternative financial solutions like bridging loans or development finance – products and services where credit scores are of no consequence.
- How much do I need?
Always ensure that the sum you ask for is as realistic and accurate as possible. If you ask for too much and cannot justify the full sum, your bank is unlikely to take you seriously. Likewise, ask for too little only to then ask for a top-up later and your bank will begin looking at your financial projections and knowledge with suspicion. Shop online and compare the market for the best rates for the loan you need. Work out exactly what you need, rather than pulling a sum out of thin air.
- Should I borrow based on collateral?
One of the biggest benefits of borrowing based on collateral is the simplicity of the application process. Using bridging loans as an example once again, securing a loan against a property or other assets renders most qualification criteria redundant. Credit score, income, current financial situation – all of little to no consequence. What’s more, secured loans typically attach far lower rates of interest and borrowing costs than unsecure loans.
- Can I definitely repay the loan?
Realistically, only you know for sure whether or not you will be able to repay the loan. You can make all the promises in the world to the lender, but it comes down to you to determine whether you’re in a comfortable position to meet the repayment terms. And if you’re not, you really shouldn’t be looking for a loan in the first place.
- How does my credit score look?
If you are applying for a loan where your credit score will be taken into account, you might want to take a look at it first. You can access your credit report free of charge these days, which should instantly give you an idea of whether and to what extent you’ll qualify for a loan. What’s more, if there’s any damage evident on your credit report – justified or otherwise – it’s a good idea to take action to reverse or correct it ASAP.
- Do I have all the documentation I need?
Last but not least, and particularly when it comes to business loans, you are going to need a serious amount of paperwork to prove your credibility to the lender. The clearer you can prove your case with clear documentation, the better. By contrast, the vaguer your case and the more key documents you don’t have prepared, the less likely you are to be taken seriously.