Important Tips That Will Help You Prepare To Get A Loan

Wednesday, February 17th, 2021
man in nice blue shirt signing paperwork

Thinking about getting any type of loan can be stressful, especially if you have never tried. You must be organized every step of the way and be prepared with all necessary documents. Here are some tips that can help you during the preparation process.

1. General tips to remember

Although the various types of loans differ, there are some things you should know that work for each one.

Understand how loans work

Before you apply for a loan, it will be helpful to understand how lenders see the process. To any institution lending out money, they see the transaction as a means of making revenue. This is why they want to see that you can pay them back. You will need to show that you are capable of this, as well as what the loan will be used for and when you will be paying it back.

The lender will look at your collateral, credit, and income to see if you qualify for a loan. Getting a small loan using your car title as collateral is different than asking for $120,000.00 for a home. This is why some of these factors may be more important to one institution than another.

Bonus Tip: If you are confused about how loans work or what the lender will be looking at, don’t be afraid to ask questions.

Know your credit health

This is the first thing that lenders will look at. Your credit is comprised of many factors that make up a single score. The minimum score to get a loan will depend on the lender you are borrowing from and the type of loan. You should be familiar with your score, as well as any liabilities that may be affecting it.

Bonus Tip: If you need to remove anything from your credit history, this will take time. The sooner you become familiar with your score and history, the better.

Know where to get your loan

You don’t have to get a loan from your financial institution, although this may be easier in some cases. Many places will lend money for a variety of purposes. You can find online lenders that may offer faster services. If you have a bank where you have good standing, they may special rates. Another popular option is to find a credit union because they offer lower rates than banks. Local credit unions are able to provide more personalized services as well.

When doing research, read reviews and ratings online. Also, look into the history of the institution. You may find that they haven’t been legitimate in the past or that they have been a trusted member of the community for years. Keep a list of all the pros and cons of each lender to help you decide.

Bonus Tip: Even if you aren’t a member of a credit union, consider joining one. They will offer benefits in the long-run that banks just can’t provide.

2. Tips for getting smaller loans (auto, personal, etc…)

Getting smaller loans can be easier than seeking financing for a home or business. Because of this, you will find you have more options. Following these tips will help you prepare to get an auto, personal, or recreational vehicle loan, among others.

Find out how much you need

Before you choose where to get your loan, be sure you have a solid idea of how much you will need. Take auto financing as an example. You should look at vehicles before getting the loan so that you have an idea of how much you can afford. Once you have chosen a vehicle that is within budget, work with your lender to get approval. Ask about E-signature to make the process faster.

Bonus Tip: Ask your financial institution about current loan rates, as these can fluctuate often.

Compare offers

It is helpful to compare offers from different lenders. If you are getting a personal loan for home renovation, you want to make sure you can get the full amount that you need. For auto loans, you may think it is easier to work with dealer financing, but going to your credit union or bank will often prove to be better. Make sure to save all documents related to your research and keep them organized.

Bonus Tip: Don’t be afraid to shop around! You should be picky about where you get loans because they affect your financial health and future.

3. Tips for getting home loans

Home loans (and home equity financing) are more complicated than personal and auto loans. This is because they involve more financing and regulations. Here are two tips to help your prepare for a home loan application.

Make regular deposits for your down payment

If you don’t make regular deposits into a savings or checking account, you should start as soon as possible. Lenders like to know that you have steady, verifiable income. So, you should be depositing funds as long as possible before applying for financing. If you get a gift for your loan, this needs to be documented as well. The goal is to track your deposits.

Bonus Tip: Be sure that you have enough time when depositing money. For example, when seeking a home loan, you have 60 days to complete and close on the loan. For auto loans, you simply need a down payment.

Gather and organize all of your documents

One of the most important steps in preparing for a loan is organizing your paperwork. You can start with getting your W2s for at least two years as well as a year’s worth of pay stubs. You might also be asked for loss and profit statements, bank statements, income reports (Ex: payments from rent properties), and more.

Be sure to have everything in order and in a safe place before applying for a loan. If you need to add any documentation, place it in the appropriate area. You can use file folders or online spreadsheets to keep everything in order.

Bonus Tip: Talk to a professional about what documents to gather BEFORE you apply for a loan.

Need more information about preparing for a loan?

At Borger Federal Credit Union, we want all of our members to be prepared and in good financial standing. That’s why we offer financial education and are happy to answer any of your questions! Give us a call at (806) 273-9506 or stop by to speak with a member of our Team and learn more about our Loans and Services.