How to Get a Loan
We need money or finance to accomplish the day to day tasks of our life. Nothing in this world comes free. We need money for every small or big requirement. Sometimes we have it with us and sometimes we need to arrange this resource through external sources. We all are familiar with the concept of ‘loans’ and when in need, we hunt for information on ‘how to get loans?’ In today’s scenario where prices are soaring high and the list of needs is increasing, resorting to loans to fulfill these requirements is very common. There are many different types of loans and different means through which one can get a loan. Also, the various reasons for which one can get a loan are also varied. However, before all this, let us try to understand how to get cash loans that fulfill our requirements.
Ways to get a loan:
Whenever we are in need of finance, the first thing that comes to our mind is borrowing a loan. Loan is an amount that we borrow from some bank or any another source, with a certain rate of interest, and for a fixed tenure.
There are different sources from where we can get loans, such as:
- Banks - banks provide loans after a thorough documentation and they charge a fixed rate of interest depending on the type of loan.
- Private money lenders - these are people who lend money (with or without any security), with usually high rate of interests, least documentation, and fast processing.
- Financial institutions - these are specially designed organizations to offer loans/finance to the needy. Here the processing is fast and usually simple than that of banks.
- Friends or relatives - this highly depends on the person’s rapport with his/her friends and relatives. There are usually no conditions in such money borrowing, but trust is the major factor.
- Employer - in many situations, one’s employer can also offer a loan to one. The conditions in this case are strictly laid down by the employer.
Now that we know different sources from where one can get loans, let us try to understand the basic procedure of getting a loan from a bank or financial institution.
- Get your credit report:
The first thing that a bank or any financial institution will need is your credit report. The decision of sanctioning a loan depends on the credit report.
A credit report is a record of one’s finances and is made by organizations like Equifax, TransUnion, etc. It is a summary of one’s financial transactions and financial history pertaining to banks, loans, credit cards, etc. The above-mentioned organizations provide a credit score based on the details in the report. The higher the credit score, higher the chances of getting loans and vice versa. If one has a poor score, one will first have to work on improving the score to become eligible for applying for a loan.
- Improving the credit score:
If one’s credit score is very low, one won’t be able to get loans or any other kind of financial assistance. To improve the score, one will first have to make sure that one clears all the pending bills. Even if one manages to clear a certain part of bills, the score improves. Also, many times the errors in the credit report lead to incorrect scores. So check the report and get such errors rectified to improve the score. Besides this, one can also opt for a new credit card. With low score getting a new credit card will be difficult and the balance provided will also be comparatively low, but it will certainly help in improving the score. Once you get a new card, make small transactions using the card and ensure clearing bills on time. This will improve your score to a great extent.
Once the score is improved, you can then think of applying for a loan. However, a bad credit history might make things difficult and would also affect the rate of interest charged, but still one can get a loan.
Arrange all the documents required for getting a loan, such as identity proofs, credit reports, financial statements, security to be pledged, etc. Ensure that all documents are updated and as required by the bank or financial institution.
Fill in the loan application form, mention the reason of loan requirement, attach all the required documents, get the form and documents verified, and send the application for further processing. One will also have to go through verification and inspection before the application is approved. A co-signer or guarantor is essential to get a loan. This co-signer should not have a bad credit score.
Once the application is approved, the loan amount is credited in the bank account of the applicant. The applicant can make use of the amount and return the same as per the conditions put forth by the bank.
When the credit score is very low, and getting loans from bank or financial institutions or banks is impossible, private money lenders come into picture. They usually provide unsecured loans and thus have a high rate of interest.
Analyze your credit score and requirements and try to know how to get loans in different scenarios for different requirements.