The whole lending industry abounds with unfortunate stories and this is caused by people who are confused about what they should do when they obtain new loans. In reality, we could be dealing with a variety of unscrupulous lenders and they are more than willing to take advantage of our situation. Fortunately, there are eight things we could do to ensure better success in the lending industry.
- Be fully prepared: Before applying for a loan, we should make sure that we can afford to repay the debt. This is the first realization that we need to be sure of, even before we begin searching for lenders. We need to check our credit score to know whether we will be approved for a loan or we will get a low interest rate. It is believed that many credit reports are not entirely accurate and they may contain errors. So, we should check whether our credit score should be higher than what is stated. Many small errors can be fixed by notifying officials and we should also provide the proofs of the error. Lenders typically base our loan on the FICO score, which will be included in a mathematical model to determine whether we are eligible for a loan.
- Look for things that can affect our loan: Our debt to income ratio and credit score affect our FIC score and we could expect to get low interest rate only if we have near perfect score. In this case, we could achieve higher score by meeting our debt obligations. If our FICO score is low, then our interest rates will be much higher. We should whether we can really afford the required down payment, especially when we expect to apply for large loans, such as mortgage for purchasing a new house. The amount of equity and asset we have could also determine whether we will get low interest.
- Always compare multiple lenders: There should be a list of lenders in our area and even if we have excellent offers from the first lender we contact, it is still important to shop around. One common mistake we do is working with only one lender. As an example, we should go to only one dealership, if we plan to buy a new car. Loans can be negotiated and we don’t have to accept all the required down payment and interest rates. We should look for multiple quotes and brokers should be eager to provide them for us. By comparing quotes and negotiating for the best offers, we could obtain an excellent deal.
- Look for the best loan: Loans can be different and we should understand the advantages and disadvantages of each. For example, if we are able to repay quickly, we could choose construction loans, but if we can’t; then it is a good idea to look for 30-year mortgage with fixed interest rate. We should determine what options we have and whether we can choose the best loans for our situation.