Maybe you’re a college graduate, or recently graduated from high school, and looking for some funding to stretch your dollar. Did you get turned down by your lender the first time around due to lack of credit? That’s why it’s important to know exactly what to have or not have on your credit report. There are several ways to build up your credit and qualify for a variety of loans. Keep in mind that each type of loan has different requirements. Here are just a few things you’ll want to sort out, prior to filling out your application.
Having All Of The Necessary Documents In Place
Obtaining a loan can be a simple process—it’s the timeframe for closing or final approval that can be time-consuming and sometimes stressful. First, you need to fill out a loan application and turn in the necessary supporting documentation to see if you’ll qualify. It basically tells the lender if your credit score or FICO is strong enough to qualify for final loan approval. If pre-approved, the application is typically good for anywhere from 15 to 30 days afterward. In order to get approved for any larger loan, such as a car loan, as well as a personal cash loan, you’ll have to present a few things such as:
- *Current monthly income or proof of employment.
- *Personal information including driver’s license and social security number.
- *A specific credit score range, generally between 655 and 714 for a car loan, according to Bankrate.com.
- *Credit report data showing a solid payment history, if you’re obtaining a car or home.
- *Previous and current bank statements.
- *Proof of residence.
If your credit is good, the lender will give you a specific approval amount that they will tentatively lend to you to cover the loan. If there are any stipulations, such as a loan requiring a co-signer or a specific amount of money down will have to be completed before the loan is granted. For instance, applications for installment loans will only be approved once all information is verified and the underwriting department has determined that you are a good candidate. These loans are easier and sometimes faster to obtain than a loan from your bank or credit union.
Should Your Fix Credit Problems Before Applying?
If you can’t get approved for a bank-funded loan the first time around, don’t panic, this gives you time to address any credit issues and fix anything that may be out of place on your credit report, including:
- *Old credit card charge-offs that weren’t removed from your credit report.
- *Erroneous amounts owed on specific accounts.
- *Wrong addresses.
- *Your name being tied to accounts you never opened or used.
- *Judgments that are outstanding or other unpaid debts or credit cards.
- *Proof of payments that were made on time, but show delinquent on the report.
Not gaining approval from a pre-qualification does not mean you won’t qualify for the loan, it just means you need to fix the issues and reapply at a later date. Keep in mind that all lenders have different qualifications and requirements. If you’re applying for an installment loan, the requirements may be more relaxed and you don’t have to have perfect credit to receive final approval.
What About Interest Rates?
All loans, personal, mortgage, auto and even payday loans, have some form of interest rate and fees tied to the amount they plan to lend to you. These loan terms are often discussed just before final approval. In many cases, if you’re already pre-approved, you’ll get a good interest rate. This shows lenders that you’ve taken the time to get your credit in shape and that you take your financial livelihood seriously. Installment loans often have high interest rates but are great to use if you have problem credit and can pay it off quickly.
Take several things into consideration before obtaining any type of the first-time loan. Having the necessary documents in place is the first step in making the loan process easier and quicker.