At some point in our life, we all need a little financial help to get through the tough times. Whether you require a little amount to handle sudden expenses or need money to buy a new house, loans can help you handle any type of money situation. With a number of banks and private lenders willing to offer financial assistance, getting a loan for your monetary needs has become easier than ever.
But not everyone finds it easy to get a personal loan from banks. Whether you apply for a large loan or a small credit, your application is evaluated and approved on the basis of your capability to repay the loan. This capability is a projection of your past credit records, repayment trends, and default history, and is denoted as your credit score. Most countries have a standardized credit rating system, which denotes an individual’s credit fitness out of 850.
A credit score more than 700 means that you have always paid your dues in time, and are financially able to take on the responsibility of a loan. This means that the banks would process your loan without much trouble. In case you have had troubles with your loan issuing bank or credit card company in the past, then there are high chances that a bank would reject your loan application.
If you are in need of some urgent money, then you should consider evaluating your application better so that you know what type of loan to expect. Starting from assessing your credit score to choosing between banks and private lenders, planned loan process can help you get credit quicker, and easier.
Check Your Credit Score
The first thing you should do before you set out seeking loans is to check your credit score. You can get a copy of your credit report from the national rating company or via various online credit assessors. Once you know your credit score, you will have an idea about what options can you pursue currently.
A detailed report will also help you understand the reason behind your bad credit score, and how you can work towards improving it. Mending your score is a gradual and long process. It can sometimes take years to reach a decent credit score, even if you pay all your dues timely, and have a well-paying job. This is because the rating takes into consideration your loan payment history, and keeps a note of your previous defaulting and delayed payment.
With more information about your credit worthiness in the eyes of lenders, you can prepare your loan application better by adding elements like collaterals, looking for guarantors etc.
Also, while you may not be going to banks for a loan now, it is always a smart idea to gradually work on improving your credit score by making timely payments. If your overdue amount is very high, talk to your bank or credit card company about easy monthly payment schedules. This way, you can slowly pay off all your dues and debts.
Evaluate Repayment Capacity
While your credit score depicts your financial fitness, it uses past information to determine if you can get a loan today. This method fails to utilize your current financial position in assessing your eligibility for credit. You must evaluate your repayment capacity i.e. if you can repay the loan you wish to take.
List down the existing loans or credit you owe, and compare them with your monthly income. This will help you determine your debt to income ratio. If you have a low debt to income ratio, you can look for more loans to take care of immediate money needs. Most banks might not consider your application if you have a high debt to income ratio, or have a low credit score, but you can still get wage day advance or short term loans from private lenders who entertain bad credit score loan applications as well.
Decide Between Banks and Private Lenders
Most people go for loans from banks or financial institutions as they offer great terms of repayment and low interest rates on loans. But banks have strict eligibility criteria when it comes to credit, and require a high credit score in order to consider your application. People with past loan or credit card defaulter record will have a difficult time convincing the bank to issue a new loan, as the bad credit score stains your repayment capacity.
In such cases, you can turn to private lending agencies which offer easy and quick credit solutions for people with bad score. These companies offering bad credit loans online have relaxed criteria and process applications very promptly.
With effective planning and a thorough assessment of your financial strength, you can avoid pitfalls in getting loan. Look for a reliable lending agency online to make sure you get the apt financial assistance you need.