Getting a loan can help you in many ways. You can use the money to pay off a debt, invest in home improvements, or fund your family holiday vacation. However, before you enjoy its perks, you should make sure your application gets approval first.
Whether it is your first time applying for a loan or not, knowing the common loan application mistakes can help you determine the best way to navigate and succeed in this phase. Here are the five things you should never do when making your application:
#1: Do not forget to check your credit score
The best thing you can do before applying for a loan is to check your credit score. Believe it or not, your credit can affect various aspects of your financial life. This step will help you understand where your credit currently stands. By knowing this detail ahead, you get to gauge your ability to qualify for loans. It also determines whether you can get better interest rates or if you should work on improving your credit score first before making an application.
With a low credit score, your application has a higher chance of getting denied. If you want a high chance of approval, try to aim for a score above 600, and make sure to pay your outstanding bills and existing debts on time.
#2: Do not lie about your income and expenses
One of the worst things you can do when applying for a loan is faking your income and expenses report. Doing this is considered fraudulent, and the bank or lending institution can file a case against you as a result. Apart from an unapproved loan, you will also get a fine that can reach up to one million dollars and a jail time sentence of up to 30 years.
Some businesses might do this to stay afloat, but unless you are ready to face the consequences, do not even consider thinking about it.
#3: Do not forget to look for options
Before you pursue a financial institution’s loan offer, make sure that you study your options and compare them. Consider the fees they charge, the interest rates they give, the loan terms they offer, and whether you will get a fixed or variable interest rate. All these details can affect how much you will be paying each month, so make sure to find the setup that will work for your needs.
#4: Do not forget to read the terms and conditions
Some people tend to skip reading the terms and conditions of the loan they are applying for, but no matter how boring the task is, it is important that you thoroughly dissect all the information in this document. All the loan terms and fees are detailed in this section, so it will be easier for you to understand what you are getting yourself into. Doing this daunting task early can help save you in many ways.
#5: Do not submit several loan applications at the same time
Applying for multiple loans might be something you consider doing. You might have thought that it can help you find the best offer you can get. However, be reminded that your credit score lowers by a few points with every application. In short, applying to several lenders can immediately cost you around 20 points. Limit your options first and wait for the results before you proceed to others, or consider how many points you are willing to lose before moving forward.
Applying for a loan can be a stressful and intimidating challenge, but knowing what to avoid can help the process become smoother and more manageable. Refrain from committing any of the common loan application mistakes by following these reminders. The better you know how it goes, the better your chances of getting your loan approved.
Are you in need of a loan? If you need a home equity loan or auto loan in Buffalo, we can help you. Good Neighbors Credit Union can provide you with the best tools and resources for you to manage your finances. Contact us to learn how we can help.