Applying for a loan can feel like a scary prospect at times. It can feel like lenders are out to trip you up with tricky jargon and hidden terms and conditions, and while this certainly isn’t the case most of the time, it is true that there are unscrupulous lenders out there you should try to avoid. As such, there are tips that you should always keep in mind when it comes to applying for your first loan, as although most lenders are there to help you, some might simply be out to scam you. Here are our top tips for applying for your first loan.
Get your credit score in order
There are many sites out there that will allow you to check your credit rating. These sites include Experian, CreditKarma, and others, so you’ve always got options when it comes to making sure you know your credit score. This figure might seem innocuous, but it’s actually a huge factor in whether or not you’ll be approved for a loan, so before you even begin applying, it’s a good idea to know what your credit score is. This will arm you with knowledge you might be able to use to negotiate loan terms when you do start your application.
Choose the right lender
Whether you’re applying for your loan in person or online, it’s important to make sure you pick the right lender. After all, not all lenders are created equal, and the lender you decide to go with could make or break your loan application and whether your repayment terms are favourable. We’d recommend applying for online loans first and foremost; they’re much easier and more accessible than their physical counterparts, and there are so many reviews and user comments available that you’ll easily be able to sort the wheat from the chaff.
Know your finances in and out
Before applying for your loan, take some time to pore over your finances and make sure you know the state of your bank balance. If you can’t answer simple questions about your money, then you might be rejected on the basis that the lender thinks you’re irresponsible with your spending. Prior to submitting your application, spend some time looking at your bank balance and examining every transaction in detail so that you can answer questions about potential problem areas. Try to anticipate those questions, too; try to identify areas where lenders might question certain transactions and have answers ready.
Read every application question carefully
A typical loan application will have myriad questions, and it can be difficult to process them all properly. However, it’s important that you try to do so, because if you misread or misunderstand a question, it could have seriously negative consequences for your application. Don’t just dash off your application during your lunch break; pick a moment when you have a lot of spare time to devote to it and make sure to double-check each of your answers to the questions when you’ve written them. This goes double for an online loan application, as they’re often much easier to submit.
Consider building your credit history first
Instead of immediately applying for a loan, you may wish to consider taking out a credit card and making some smaller transactions on that in order to build up your credit history. This can stand you in good stead when it comes to applying for your loan, because lenders will see you have a better credit history and will be better disposed towards granting you the loan. If you can’t get credit, then you may wish to apply for a specific credit builder card; they’re designed to help those with poor credit ratings build their credit scores and climb out of the debt hole.
Pay off other debts first
While this sounds a lot easier than it often is, you should try to make sure that you pay off other debts or loans before you apply for a new one. This is because lenders may not give you credit if they see that you have outstanding loans; if they don’t think you can repay the loans you already have, they might be squeamish about adding to that debt burden. Naturally, there’s a chance you might be applying for the loan precisely because you can’t pay off other debts, but if that’s the case, make sure lenders are aware of that fact ahead of the application if possible.
Get someone else to look at your application
One of the best ways to ensure your application is solid is to get someone else to take a look at it. If you can convince a friend or family member to once-over your loan application and verify that everything looks good, you’ll save yourself a lot of potential headaches later down the line. Try to make sure that the person looking at the application spends enough time with it to ensure that it’s free of problems; the last thing you want is to trust someone only to realise that they haven’t given your application the due care and attention it deserves.
Don’t apply again straight away if you’re rejected
Many people make the mistake of immediately applying for a loan again after they are initially rejected. Doing this is a bad idea because rejected loan applications will often end up on your record, meaning that companies will see you’ve applied and will be more cautious about granting you an application. Try to space out loan applications so they’re not coming one after the other. This will look better for your credit score, and it will also give you a chance to pause and take stock of why your applications might have failed.