For individuals planning to apply for loans, there are a few things they should first look into. They include:
1. Credit Score and Credit History
If a person has a good credit score and history, it shows the lender that he’s capable of making repayments on time. So, the higher the credit score, the higher the likelihood of the individual getting approved for a loan. With a good credit score, an individual is also has a better chance of getting favorable terms.
Before applying for any kind of loan, another aspect that an individual should evaluate is his income. For an employee, they will have to submit pay stubs, W-2 forms, and a salary letter from their employer. However, if the applicant is self-employed, all he needs to submit is his tax return for the past two or more years and invoices where applicable.
3. Monthly Obligations
In addition to their income, it’s also crucial that a loan applicant evaluates their monthly obligations. For instance, an individual may be receiving a monthly income of $6,000 but with monthly obligations amounting to $5,500. Lenders may not be willing to give loans to such people. It explains why most lenders ask applicants to list all their monthly expenses such as rent and utility bills.
A loan is a sum of money that an individual or company borrows from a lender. It can be classified into three main categories, namely, unsecured and secured, conventional, and open-end and closed-end loans. However, regardless of the loan that one chooses to apply for, there are a few things that he should first assess, such as his monthly income, expenses, and credit history.