There will most likely come a point in your life when you will have to apply for a loan. The typical teenager will most likely get that first experience applying for a student loan. Other people will most likely have to apply for a car loan or mortgage at some point. What should an applicant expect when applying for a loan?
Secured Or Unsecured Loan
The type of loan a borrower is going after will determine the initial borrowing requirements. Secured loans generally are easier to get because the loan is tied to an asset that is being used as collateral. A lender can sell off that asset in the event that the borrower does not pay. An unsecured loan has no collateral attached to it and can be harder to qualify for. A good credit score is usually required as the only guarantee a lender has is a promise of repayment from the borrower.
Expect To Fill Out Multiple Forms
The loan application process is never an easy one. Some loans may only require you to fill out a few lines, but some loans are going to require a multiple step process. A car loan will require that you fill out a form requesting the loan and then filling out more paperwork to complete the deal once the loan is approved.
A home loan is the messiest loan of them all with an avalanche of paperwork that has to be signed, sealed and delivered before you even think about closing on the deal. However, a credit card application generally only requires filling out a few lines for a lender to make a decision.
Check Your Own Credit Before Applying
Know what your credit score is before applying for a loan. Lenders might try to tell you that your credit score is lower than what it actually is. This can cause the borrower to spend money that you shouldn’t have to shell out in interest payments. A credit score also determines whether or not a co-signer is needed for a particular loan. Credit reports can be obtained for free by simply going to the websites of the credit agencies and requesting a copy.
Applying for loans can be a frustrating process at times. Make sure that you have all of your credit information handy and prepare to dig in for the best rate you can possibly get. The more you know, the more you can save in the long run.
Have you applied for a loan recently? Did you feel prepared?