Whether it’s for a business or personal use, there is sometimes the need to obtain a loan. Obtaining a loan from a bank is no longer as stressful or time-consuming as it was in times past. These days, one can obtain loans within a short time. Read on to find out how to get a loan from banks.
Before getting a bank loan
Loans are very beneficial when used for the right things, however, they can also put you into a series of debt and trouble, if you don’t have a good plan. Before applying for a bank loan, ensure that your reason for application is indeed essential. Getting a business, car, or house loan is only a valid reason when you already have a good source of income and a strategic plan to repay such loans. Getting a loan for a vacation or other frivolities will be a bad idea and can essentially ruin your financial life.
There are multiple banks in the country, so before signing in for a bank loan, ensure you check the terms and conditions. The terms will include the repayment plan, interest rates, penalty for default payment, and others. Be sure that the bank’s terms are favorable before receiving any loan. You can compare terms with other banks before picking the best bank for your loan.
Typically, long-term loans usually have a lower monthly repayment rate, compared to short-term loans. However, as the years go by, the interest will add up, and you may end up paying more. Whether you’re going for a short or long-term loan, ensure it favors you.
Eligibility for bank loans
Before you can obtain a loan, there are a few criteria that must be fulfilled. Firstly, you must be of a certain age, depending on the bank. For some banks, the minimum age to get a loan is 18 years, for others, it is 21 years. If you’re below the required age, you will not have access to a bank loan.
Additionally, you must be a resident of the country and have a good credit rating. Your credit rating determines the amount of money you will be allowed to borrow. It is calculated based on your income and other financial information. Depending on the amount of money you want to borrow as well as the timeline for repayment, you may be asked to provide collateral and/ or the guarantor’s signature.
Typically, a bank loan can run from within a year to seven (7) years and its interest rate largely depends on the bank. You also need to have a current account, a valid identification card and provide other documents requested by the bank.
Tips to improve your credit rating
Your credit rating is a crucial determinant in getting a bank loan. To improve it, you need to first check your credit report and know where you stand. You can then make improvements or check if there are mistakes.
To increase your credit rating, all your loan or credit card repayments must be made on time. By repaying all debts on time, you will build your credit history and by large your credit rating. You also need to avoid making multiple applications for loans or credit. Each application will leave a footprint that will negatively affect your credit rating.