Loans can be incredibly helpful when you are in a bind and need to find a financial solution.
In this day and age, there are so many different types of loans for each and every unique situation – not to mention the number of available lenders. This can make the lending process far more complicated than it needs to be.
It is surprising how many lending errors people make when they are looking to borrow money from a bank or private lender. Therefore we have compiled a list of do’s and don’ts to keep in mind when you are applying for a loan.
What TO DO when you are applying for a loan
1. DO compare
The odds of the first lender you find being the best option for you is highly unlikely. Therefore, it is strongly advised that you look around before settling on one lender. There might be a better option out there that offers lower interest rates. With all the various lenders available, some, more than others, offer additional benefits and services, which might come in handy.
2. DO prepare
It is important that you show up to your lenders’ office prepared to dazzle them with your proposal. You need to appear to be the ideal client. Lenders want to see that consumers have done their research and detailed planning. It is recommended that you can inform your lender exactly whereto the loan money will be allocated. And how you will be able to afford the monthly payments required.
3. DO be informed
It is essential that you are informed of your financial status. You need to not only have all the necessary financial documentation but you need to know the numbers by heart in order to seem confident and informed when presenting your proposal or answering questions. Proving that you have planned, will more than likely impress your lender and improve your chances of getting finance.
4. DO have a business plan
You need to have a well-researched and professionally assembled business plan ready to present to the lender. The worst thing you can do is show up empty-handed and ask the lender to back a concept that consists of nothing more than words. A business plan is one of the requirements when applying for a business loan.
5. DO consult your attorney
Loans mean contracts so before you sign anything be sure to ask your attorney to go over the contracts and legal documents concerning the loan before committing to something that you do not fully understand. This is the best way to avoid deceiving fine print and hidden clauses.
What NOT TO DO when applying for a loan
1. DON’T ask how much you qualify for
Often people looking to borrow money from a lender ask the lender how much money they qualify to borrow. Never ask your lender this question. It makes you seem uninformed of your financial situation. You need to know how much you need and stand by that number – how much you qualify for is irrelevant. You can also make use of online loan calculators before entering your meeting.
2. DON’T overestimate
People tend to overestimate the amount of money that they will be able to repay, which often leads to applying for a more expensive loan than they can afford. So be sure not to overestimate your finances in the lending process.
