Regardless of your financial situation, there’s a good chance that you’ll need to get a loan at some point in the future. This could come in the form of a mortgage, a student loan, an auto loan or a small business loan.
While these loans are for different purposes, the process of applying and qualifying for them is basically the same. Understanding the process of obtaining loans is important so that you have realistic expectations going into the application.
Steps to getting a loan
The Application
The first part of the process of getting a loan is filling out a loan application. Most lenders will provide this application to you in person or you may be able to download an application from the lender’s website.
When filling out the loan application, you will need to give the lender some personal information like your name, phone number, address, Social Security number and income. To go along with the application, the lender may also ask for some documentation such as pay stubs, tax returns or bank statements so that your income and assets can be verified.
Underwriting
After you apply for the loan, the lender will typically give your information to an underwriter. The underwriter is an individual who looks at your credit profile, your income and your application to determine if you are eligible for a loan.
The underwriter typically utilizes ratios such as the debt-to-income ratio to figure out if you can handle additional debt. If your financial situation fits in with all of the various criteria that the lender has, you can be approved for the loan.
Closing
With some loans, you’ll then need to attend a closing to get the money you need. This is most common when getting a mortgage, but it could also be the case with other types of loans. You’ll attend a meeting with the lender and sign some loan paperwork in order to get the money you need. Once you sign the paperwork, a check for the money you need will be provided by the lender.
Different Types of Loans
If you have a need for quick loans, you may not need to go through all of these formal processes in order to get the money you need. While personal loans, car loans and mortgages have a place in the financial world, sometimes you just need access to quick loans so that you can get money when you need it. There are different loans for different situations.
Student Loans
If you are considering going back to school, then it is possible that you may need financial assistance. Student loans are available to those who are seriously considering getting a degree to better their career path. Student loans come in many shapes and sizes and should be considered thoughtfully. Depending on your country of residence, the interest may also be tax deductible!
Business Loans
If you want the freedom of owning a business, then it’s possible a business loan may be in your future. New business owners might get a business loan to purchase inventory, or spruce up their storefront. Existing business owners might use a business loan to make payroll during the month because something unpredictable might have happened to their cash flow.
Payday Loans
Many merchants provide loans on your future income in the form of payday loans. With this type of loan, you take your pay stub into the merchant and show them how much you make. As long as your income is above a certain level, the lender will provide you with an instant cash loan.
With this type of loan, you are expected to pay the money back as soon as you get paid. These loans come with much higher interest rates, but they can put cash in your bank account in as little as an hour if you are in a dire financial situation. Regardless of what type of loan you use, make sure that you can afford to pay the money back in a timely manner, and ensure that it is the right loan for your situation.
The preceding article was a guest post written by one of our readers.
