4 Steps to Prepare Yourself for a Bank Loan

Mar 6, 2020 by

You’re about to apply for a bank loan, whether you plan on using the money for your business, house improvements, you need extra cash, or for another reason. How can you improve your odds of getting approved? How can you prepare and be more informed? Here are four steps to prepare yourself for a bank loan.

Understand Your Credit Score

First things first, it’s important to understand what your credit score is and what it actually means. Ranging from 300 to 850, a higher credit score is, of course, better. For the most part, your credit score is based on your history of making payments/bills on time, as well as credit utilization and possible blunders on your end.

Your credit score is an important aspect when it comes to getting approved for a loan, but it’s not the only aspect. After all, your income will also play a role. Know your credit score going into your meeting or approval process as you might be able to explain a possible blunder or be able to provide your lender with more information.

Do Research on the Bank

There are many lenders that are willing to give people money, but not all lenders are created equal. When researching the bank or lender you’re trying to get a loan from, you should check reviews, the history of the bank, how long it’s been operating, and other important questions you might have. You can also do a free background check via GoLookUp to see if there are any red flags with the company you’re interested in. If there aren’t any red flags or bad history, then you should be in the clear.

Round Up Your Paperwork

This step is especially important if you’re trying to get a business loan as you’ll need to show your lender your business plan and other necessary paperwork to prove your business is a success in the bank’s eyes—in other words, to prove your business is profitable. If you’re not sure what you need, you can, in a sense, have a pre-meeting with the bank and ask the lender what necessary paperwork you’ll need.

With that said, so many practices are taking the digital route and applying for loans is no exception. So the entire application (and approval) process might take place online, giving you extra time to come up with the necessary documents you need as you can save your application and go back to it throughout. Nonetheless, it’s never a bad idea to be prepared, especially if you’re meeting your lender in person.

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Remember You Have Options

While a bank is going to have many questions for you, it’s perfectly reasonable for you to have questions for the bank. You want to ensure you’re making the right decision that will set you up for financial success.

Part of understanding your options is understanding the types of loans that are provided and interest rates, such as term deposit rates for different term lengths. While a lower interest rate technically means you’ll pay less in interest, which is important, if the loan is for a long period of time, then that increases the amount of time you’ll be paying it back. This is more of a question when refinancing a mortgage as doing so can decrease the interest rate and lower the mortgage, but lengthen the loan period.

The point being, whether you’re investing or refinancing or need extra cash, you need to understand the different loan options so you make the correct choice. You want to impress the bank so they lend you money, but you’re the customer.

There are many steps to take when preparing for a bank loan and everyone’s journey is different based on credit, the type of loan, and other factors. We hope these steps will help during your preparation process.

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