Borrowing money can help you do things, but it can also be complicated. If you need money, find out how to get loans and how they work. Learn the process so you know what to expect and what you can do ahead of time.
Understand Your Loan
Before you get a loan, make sure you know what you’re getting into. Borrowing may make your life easier, but you can also get into trouble. Learn how loans work, and figure out if you can afford the payments before you buy. Remember that the money you spend on interest is gone for good.
Choose a Lender
You’ll need to decide who to get a loan from. In some cases, you don’t have much choice - the loan may be part of whatever you’re buying. Otherwise, you can visit with a variety of lenders - banks, credit unions, online lenders, mortgage brokers, and so on.
The type of loan will also affect who you borrow from. Not everybody offers home loans or RV loans, for example.
Whatever your choice, ask a lender how to get a loan and what your options are. They’ll provide paperwork and let you know what it takes to qualify. Credit unions are generally a good place to start, and banks may advertise some great deals to drum up business. Cover all the bases by comparing their rates to online lenders.
Submit an Application
You’ll have to apply for a loan by providing information about yourself and agreeing to certain rules. Lenders want to know who you are and where to find you. They’ll ask about your finances to decide whether or not you can afford the payments. They’ll also need your Social Security Number to check your credit.
Go Through Underwriting
After you submit your application, the lender will evaluate you as a potential borrower. This process may be instant, or it may take a few weeks; home loans take longer than credit card offers because there’s more at stake.
They’ll pull your credit (or just use a credit score in some cases) and review your application. Lenders may ask you to clarify or prove something; that’s generally a good sign. It means they take underwriting seriously and are more likely to offer competitive rates.
Get an Answer
Eventually, you’ll find out if you qualify for the loan. If you do, the lender will send money to you or whoever you’re buying from, and you’ll start repaying the loan.
If you don’t get the loan, you should get an answer as to why. Ask the lender how to get loans from them if you decide to try again. This information is useful because you can try to fix things. If your credit was not good enough, work on building credit and review your credit reports for errors.
How to Get Loans After You're Denied
The most powerful way to get a loan is to show that you have the ability to repay it. Your credit and income are the most convincing factors that lenders consider. However, your power to change those quickly may be limited. Keep chipping away at them, and over time you’ll become a more attractive borrower. In the short term, you can try a few things, such as:
How to Repay Loans
As you're figuring out how to get loans, keep repayment in mind.
Some loans are one-time deals; you borrow money to buy something and repay it over several years. A portion of each payment is your interest cost, and the rest is used to reduce your loan balance. This process is called amortization.
Other loans are revolving loans; you can borrow multiple times as long as you make periodic payments. For example, you can use a credit card month after month. You might pay the entire balance every month, but you can continue borrowing until you reach your credit limit.
How to Get Loans for Business
Business loans are similar to any other kind of loan. Lenders look for the same basic things. However, new businesses don’t have a long borrowing history (or credit). They also may not own assets that can be pledged as collateral, so new enterprises and service businesses have to figure out how to get loans.
In most cases, and individual - such as the business owner - has to use their personal credit and income to qualify for the loan. They may also have to pledge personal assets as collateral to get loans. This may be the only way to get loans in the early years, but you should try to build business credit so you can eventually borrow without risking personal assets.