What exactly is a loan and what does it mean to have one? Contrary to the common credence, a loan, when considered with diligence, can be a very good thing.
A loan, simple enough, is an agreement between two people involving money. This simply means that one person asks for money and the other person gives it.
Understanding a loan
To get approved for a loan, you will need to understand a loan. As aforementioned, a loan is an agreement between two people involving the borrowing and lending of money. How exactly this is done can vary because anyone can be a lender. It could be a friend, a company, etc. But here we will specifically be looking into the diligence of companies. For those large sums and pesky technical terms.
To diligently understand a loan, first, there will be a few things you need to take into account:
- You will have to find an ideal loan, one that suits your wants and needs.
- Even if you have bad credit, there is still a way that you can get a loan
- Loans can have flexible interest rates. This can be good and bad.
- Loans vary between when and how they are being paid back.
- Loans with small credit or low-interest rates aren’t the only things that make a loan great. You want a loan that saves time as well because time is money.
The loan types & terms
The most common loan type is a personal loan. This loan wages through basically every loan that can be applied under the list of your personal uses. This can be a car loan, a holiday loan, a wedding loan, etc. The list is long. Being the most common loan, this loan is also paid back in the most common way.
A specific time frame of a total amount of time will be given (as an example, five years) and it will be broken into smaller windows of which you will pay back a certain amount of the loan until the total amount of time is completed (example: Payback quarterly, for five years. This means a certainty, flexible or fixed amount will be paid for each quarter, in a total of twenty quarters. Giving you a fixed five years).
What are the interest rates?
An interest rate is a percentage that is added to your repayment amount. Remember how it was explained that you repay your loans in windows. Well, an interest rate is what causes the number of those windows to climb each time you pay. Meaning, you pay a little more every time. Interest rates are probably the most diligent part of the loan. This is what allows the companies to add a profit to keep it going and making sure you don’t die when paying extra.
An interest rate is just a small percentage number. The highest recorded interest rate in the history of Australia was 17%. This was in 1989. Presently though, the interest rate in Australia does not go higher than 2.35%. Which is quite low.
So, for a better example of interest rates, if you have an amount of money that you loan. Say $5,000.00. Then you have to pay it back monthly $208.33 for two years. The interest rate is 8%. This means that 8% of the $208.33 will be added to it, increasing it slightly each month.
These rates can be either fixed or flexible. The difference is simple. Fixed rates are where the interest rate remains the same throughout the entire repayment process. Flexible rates are where it could change, becoming greater or less.
Companies vs brokers
A lender company is a company, like a bank, that will personally work with you and allow you to get a loan directly through them. A broker, however, is more indirectly and will supply you with a loan from a different company or give you a company that suits your needs best.
At that is about the basis of loans that you will need to understand it.
1. Age & work experience
In Australia, you just have to be 18 years young, or older, to be able to get a loan. But this does not guarantee approval. It just means that you are legal. But, believe it or not, the better your work profile appears the more likely you will be accepted. The better your work experience is better the chance will be for you to get approved since you appear diligently responsible and thus also more reasonable.
2. Have previous loans
This might sound a bit counter-intuitive. But this is a very big part. Lenders love to see a lending record; this tells them just how well the lender (you) will payback. And, if you have a good track record, your chances for credit approval will improve. You don’t need a large loan on your track record just some form of loans or repayment that were made.
3. Comparing loans before applying
Knowing is half the battle. If you compare your loans before applying for one you will be able to get a lot of things done:
- Prevent rejection from various lenders
- Get approved for a loan
- Decrease the credit score
- Bypass indirect lender (e.g. brokers)
- Go directly to a credit provider after using the comparison site
4. Face to face interaction
It’s not something people like to do nowadays, but if you want to improve your chances of getting credit approval you will have to approach the company personally. About every lender has an online application that you can fill in. Although these applications are often automated and a bot will be identifying whether or not you can apply for a loan. And there is an abundance of people applying constantly, so everyone cannot be accepted.
Meeting, the company personally, or rather one of the staff, you will improve your chances a lot by appearing more diligent and formal. You will also already have caught the company’s attention when doing this. Meaning that the company itself is already considering giving you a loan, whereas through an online application, the company probably never even saw the application. The bot had dismissed it before it could reach them.
If you are meeting the company member personally, not only can you explain your situation and have them assist you in improving loan and its qualities. You will also be able to negotiate the terms of the loan and try and convince them a lot better to approve your loan than through and online application.
5. Knowing what you want
This might seem very obvious, but when it comes to loans, people don’t know what type of loan they want or need. Or even, sometimes, the amount to choose. To improve the probability of credit approval, you will need to know as much about the loan as you can. This means, finding out a company’s different types of loans and want. Truthfully, this is quite simple, and it is the very notion that, simply, that makes people ignore it. Knowing what you want is very important, and where to get it even better.
Did you know that there are about 93 credit unions, building societies and mutual banks in Australia? That is not as massive as it might appear, because if you know what you want, you can be more diligent about the companies you choose and won’t have to look at every single one.
These were the 5 ways to greatly improve your chances of being approved for a loan, now you can go out and not only get credit approval but also get better loans that are more beneficial towards you.