Imagine you have a big business idea. The industry you want to enter is ripe with opportunities and development. However, you don’t have a capital. You try reaching out to family and friends, or even angel-investors but to no avail.
Your last option is taking out a business loan from a bank.
However, getting a bank loan approved nowadays is not an easy process. This does not only apply to business loans but also auto & personal loans as well. Lenders are stricter due to the economic climate. Here are five important tips to get your bank loan approved.
1. Understand what you need
Before even stepping foot inside of a bank, you have to do your research. Compare and contrast the different loan packages that the bank and its competitors are offering. Just focusing on one bank may cause you to miss out on a better package, so be diligent and do your research.
Internally, list down what you’re looking for. Be realistic as to what you can afford and when you plan to pay it all off. If you’re looking for an auto loan or a mortgage, make sure to find the best deal that works with you.
Always check the fine print.
2. Ask all the questions.
Don’t fear being thorough—it’s your finances and your money.
When you find a loan package that you think ticks off all the boxes from your checklist, contact the bank directly to clarify what the requirements are. As much as possible, have an in-person appointment for a quick turnaround of information and to avoid miscommunications.
Different banks have different requirements per loan. It’s best to clarify what exactly they’ll be asking for to avoid wasting time and paperwork fees.
3. Don’t go overboard
It’s tempting to take out a large loan when you know that you can. However, this can prove to be a fatal mistake and land you in the desolate land of bankruptcy.
To avoid this, learn about your credit history and current score. During the application process, the bank will tell you about the range of credit scores needed to be approved for a loan.
Plan ahead and request a copy of your credit card history and credit score to give yourself time to correct any errors on your history. Given the stricter guidelines lenders adhere to nowadays, they rely heavily on your past usage of credit. If there’s any mistakes, you might end up with a lower credit score and unapproved loan request.
4. Make a list
Once you know what type of loan you want to pursue and its requirements, then it’s time to jot them down.
Requesting for paperwork such as your credit history and credit score can take some time. Documents from your employer and other financial institutions can also take up to weeks.
List them down under the deadline of your application and make sure they’re complete. Incomplete applications are known to cause for loan denial.
5. Manage your expectations
Applying for a loan takes time, so if you’re in a hurry, then this might not be a good time to do so. Rushing can cause you to make careless decisions that may affect you financially in the long run.
Remember that loan officers have a strict protocol for approving a loan. During the application process, discuss the sequence of events to figure out when you can expect an answer.
Some loans can be approved upfront, while others take weeks before a decision is made. When following up, loan officers may ask you to outline the reason behind the loan application. If it’s a personal loan, they might ask what the money will be used for.
Loan application can be a frustrating and tedious process, especially since loan officials don’t provide a specific reason as to why a loan is denied. However, no matter how frustrating it can be, make sure to make decisions with a level head. Too many loan applications can ruin your credit and reflect badly on your financial management.
Based on Materials from Forbes