The process of getting a loan from a bank can often be a long and frustrating one. The financial jargon that comes with it often mystifies the process for the average man and business owner. That is why we have developed this short guide to increase your chances of getting a loan. A main factor is the type of loan you are applying for. Mortgage loans are much harder to get than other types of installment loans. The trick is knowing a few things that motivate these bankers, allowing you to navigate the credit process with ease, even when your credit score is on the lower end:
Know who a banker is
The number one concern of a banker is the protection of the money that they have received from their depositors. As a consequence, the bankers who handle the distribution of loans tend to be rather conservative or risk averse. This means that recovery of the principal is their primary goal. Secondly, they are a business and so they want to also get a reasonable profit in the form of interest payments. And finally, believe it or not they do want to see you become successful as a result of the loan so that you come back to do more business. Knowing this should tell you that your priority is to make the banker comfortable with giving you money despite having poor credit. This can be done by carefully writing up a detailed proposal describing what you need the loan for and how you will pay off the principal and interest rates. This includes your bank statements, expenditures and other things that your credit score may not reveal.
Your Character and capacity
Two things that your banker will be looking for before giving you a loan is a good personal character and capacity to pay back the money. Be sure to give a good first impression when meeting in person, and be aware of your credit history and the impression it will give as well. If you know why your credit history is what it is, you can better defend your character from the doubts the banker may have. Secondly, your capacity is the degree of debt that you can sustain as an individual or business owner. Ask yourself whether the amount you are asking for is both necessary and minimal. Stress that you have carefully considered your capacity in light of your income and plans. Consider your debt and your potential income as a ratio. If this ratio is too larger, the banker may run for the hills.
Offer collateral and show credibility – Think of collateral as a secondary method of repaying a loan. Any banker would rather see you turn your credit history around and flourish financially, however, things can always potentially go sour. The offering of collateral shows the banker that you are serious about repaying the debt and that you have a credible source for doing so no matter what. This along with other ways of showing credibility such as having a carefully thought out business or employment plan will help the banker more easily approve you for a loan.