How to Get a Bank Loan
There are typically two forms of bank loans; secured and unsecured. Usually, an unsecured bank loan has a higher interest rate attached to it, and does not require collateral. Whereas, a secured bank loan will generally have a much lower interest rate but will require some sort of collateral as insurance that the loan will be repaid, hence the term “secured”. If a person has a good line of credit, his/her chances of obtaining a low interest rate bank loan are significantly increased. There are a number of reasons a person or business may wish to apply for a loan from a bank. Following are some simple steps in applying for a bank loan.
Make an Appointment With a Lender
Once the decision is made to apply for a loan, whether it is a car loan, a personal loan, a business loan, or even a private student loan, the first step is to decide on a lender and make an appointment. In preparation of the appointment, a person will want to gather all pertinent documentation and information they may be asked for by the lender. Generally these documents include proof of income, proof of employment, personal references, and several forms of collateral, if a secured loan is being sought. All documentation should be brought to the initial appointment; however, in many cases the lender will require something further, in which case they normally make a second appointment, giving the individual time to compile everything needed.
If the first contact with the lender of choice is a disappointment, shopping around for different lenders is often a good idea. If a person is diligent enough, he/she will almost always find some sort of financing. Even a person with poor credit may be able to apply for a bank loan, depending on the lenders and the approval processes they employ. Some lenders will require a co-signer if the person applying does not have an adequate credit score, others will require the deed to a home, a car or boat title, or some other form of collateral. There are many financial institutions that process and give out loans every day. Sometimes it is only a matter of finding the right one for an individual’s needs. A search online will often bring up a list of prospective lenders which specialize in the type of loan being sought.
Before Signing a Loan Contract
Once a lender is found and an application is approved, there will be many documents that will need to be signed. In these documents will be a number of stipulations, as well as a lot of fine print. A person should make certain that every line in the loan contract is read carefully to be sure there is nothing included that could be detrimental to them. Things like interest rate and whether it is fixed or variable should be examined, as well as whether or not there is a prepayment penalty attached to the loan. Signing a loan contract, or any contract for that matter, without being sure of the details contained in it can be very dangerous.
If a loan is obtained, it is extremely important that it be repaid according to the terms specified in the contract. Defaulting on a bank loan is quite serious and will definitely affect a credit score negatively. This can be especially harmful to a person or business in future ventures, which may require additional funding. If there is a history of loan default, securing future loans will be nearly impossible.