How To Know If You’re Eligible For A Loan

How To Know If You’re Eligible For A Loan

Anas Bouargane 13/10/2020 3
How To Know If You’re Eligible For A Loan

Sometimes, we all need a little financial help. It’s nothing to be ashamed of but can sometimes be daunting to try and understand.

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If you think you want or need a loan, and aren’t sure how to go about it or find out if you’re eligible, then please read on. We are about to discuss loan eligibility along with other loan information.

Types Of Loan

Well, there are many types of loans available these days. Traditionally, you would have to visit a bank and explain to a bank manager why you wanted a loan and what you intended to use it for. This is still an option but now, there are many more ways to ask for a loan, such as fast loan providers, payday loans, and online loans. But what can you get loans for? Shown below are some types of loans that will help you make an informed decision.

1. Personal Loan

The most common type of loan you will find is a personal loan. You can get a personal loan from a high street bank, fast loan provider, or online bank. Personal loans can be used for pretty much anything you like. There is no need to quantify to the lender exactly where you will be spending the money. There is no collateral against the loan (property that could be seized if you refuse to pay), so the interest rates are usually higher. This is called an unsecured loan. Typically these kinds of loans can range from a few hundred to ten thousand dollars and are usually repaid within five years.

2. Home Equity Loan

If you already own a home, you may be able to take out a home equity loan. As you pay off your mortgage, you gain equity - money that you would make if you sold the house. A home equity loan is taken out against that value. For example, if you have paid off 40% of the house, you can take a loan against 40% of the property’s current resale value. This means the loan is secured, as the house is viewed as collateral against the loan. If you do not pay back your home equity loan within the agreed timeframe you risk having your home repossessed and sold. On the flip side, due to this risk, you will receive a very low-interest rate.

3. Debt Consolidation

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Another common loan type is a debt consolidation loan. If you have built up various credit cards, overdrafts, or student debts, you might consider getting one loan to link them all together. Debt consolidation loans offer one simple monthly payment to make it easier for you to keep track of all your debt. The interest rates and length of loan terms can vary massively. Some lenders will offer an interest-free period to help you that little bit more.

But Am I Eligible?

Once you know what type of loan you require, and how much you need to borrow, you need to find out who will lend you this money! There are many tools and tricks here. So, let’s discuss how to find out if you are eligible for any loan. 

Interest rates are the most important costs to consider when choosing an instant loan. 

True, but not only. While interest rates are an important factor when choosing an instant loan. It is important to understand the total cost of raising capital.  People considering immediate loan options should evaluate all options, including interest rates and additional related fees. It is important to take loans from a body that offers minimal interest rates, at competitive prices, with no hidden ancillary costs whose meanings are impossible to understand, and without penalties.  Another important thing to look for is flexibility in the timeline for repaying the loan, and planning a repayment schedule that will suit your personal options for repaying the loan. If I have an existing loan, will I not be approved for another loan? Not exactly. Even if you have not finished paying an existing loan, banking or non-banking entities can still approve another loan for you. During the approval of your loan application, the lenders judge your repayment capabilities by calculating your net disposable income after taking into account all the repayments, expenses and debts you have for credit cards. After weighing all aspects, even if you have existing loans, you can get approval for a new loan, if your repayment ability seems satisfactory to the lenders. You should compare personal loans for further reading before making any decisions. Afterall, it is a big step and you need to be sure what you’re eligible for and what type of financial implications this may have in the long run. You don’t have to worry, there is plenty of help out there!

Online Comparison

There are many tools online which are designed to help you get a loan. Most take about 5 minutes to go through and get an answer as to whether you’re eligible! You will enter your income, your needs, and your personal information, and the online tools will check if you are eligible for certain loans. Be warned though, if you fake information on these and are found out, it could invalidate your loan and cause you to owe the full amount back! 

Credit Score

Understanding your credit score is potentially a very taxing thing. In theory, the more you borrow and in turn pay back on proper terms, the better your credit rating will be. So having a credit card which you pay off on time every month will push up your credit score. As will having insurance and contracted monthly payments (mobile phone etc.) Basically, show them you can be responsible for loans, and your rating goes up. Missing payments or underpaying will do the opposite, of course. There are other nuances that can become quite confusing, but that is the basic theory of credit score.

Now, the higher your credit score is, the more likely a lender will consider loaning you money. The higher your score and the lower your overall debt, the more you will be able to loan! There are again online tools available to see your credit score and what is affecting it.

So, there you have it! All the information you need about getting a loan and checking your eligibility. We hope the tools we have laid out here will assist you in your financial needs, and ensure you know when you are eligible to borrow.

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  • Nick Jones

    Insightful

  • Dion Kierstenson

    Extremely important tips

  • Romain Ranjith

    Great tips thank you

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Anas Bouargane

Business Expert

Anas is the founder of CEF Académie, a platform that provides guidance and support for those willing to study in France. He previously interned at AlphaSense. Anas holds a bachelor degree in applied economics from the University Paris Sud.

   

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