This guest post comes to us from financial analyst Kavin Matthews. BizEngine hopes you enjoy it.
Are you in the market to take out any kind of loan? There are many types of loans like student loans, auto loans, mortgage loans, credit cards. Even insurance policies may be considered as a new line of credit as you need to pay back the premiums. Not being able to take out a loan that is within your affordability could make you default and then run to the debt settlement companies for debt reduction.
When the lender lends you a loan amount, he will check a number of factors to make sure that you’re able to repay the loan on time. Almost all of us dream of having all the qualities to please the lenders, but most of us aren’t aware of the details that are checked by the lenders before lending a new line of credit. Here are some points to consider:
- Know your credit rating. While pristine credit is ideal for lenders, the majority of us aren’t so lucky. If you want to create a good impression with your lenders, make sure that you take the necessary steps to repair your credit score. Order a free copy of your credit report from any of the three credit reporting agencies. Check and remove the errors that are dropping down your score. Or, look for lenders that may be more willing to work with a less than perfect score.
- Pay down your credit card debts: The easiest way in which you can boost your credit score is by paying back your credit card debts. Credit card debts carry outrageously high interest rates and therefore when you can’t repay them on time, they affect your credit score in a very bad manner. Therefore, when you can, aim to pay back more than your minimum payment each month to make headway and slowly pay down your balance.
- You should be able to pay down money: Some loans require a down payment and if you can’t pay down at least 20% of the loan amount that you’re borrowing, you may have to pay the PMIs or the Private Mortgage Insurance payments that will unnecessarily increase the monthly payments. Therefore, you should save enough money when you feel that you’re about to take out a new loan in the market.
- You shouldn’t be risky: Always remember that the lenders will decide the interest rates on the loans by looking at the risk factor of the borrower. The more risky you are as a borrower, the more will be the interest rates as they will look forward to reduce their personal risk. Before going for an auto insurance policy, ensure reducing your risk by having a clean driving record so that the premium amounts may be within your means.
The above mentioned points are some of the financial tips that can make you a favorite among the lenders. Always check and review your credit score in order to stay within your means.
Thanks to Kavin for his guest post!
Photo credit to iStock