Getting a loan is serious business. Nearly everything in life requires a financial backing to make a large purchase unless you have plenty of money. A loan will allow you to build a new home, buy a car or build a building that will benefit hundreds of people. Before jumping out there and going into debt, you need to ask yourself a few questions. Making sure you can take on a loan is just as important as the approval.
Can My Income Justify This Loan?
The debt to ratio may seem okay on paper, but you know your financial situation way better than the banks. See, they don’t factor in all the extra costs like your dry cleaning and your home’s utility bills. After you take a hard look at all of your incoming versus your outgoing, can you really afford to take out a loan? Many people wonder how much they can borrow. The key to this is entirely based on your income. Whether you want the best construction loan or an APR that rivals those with FICO scores in the 800’s; you need to make sure you can afford it.
Should I Get A Loan?
You may be wondering if you should get a loan. If your company is talking about massive layoffs and they have cut your hours; it’s probably not the best time to go out and get a loan. The loan officers only know what your paychecks show, but you know the real story. Does your future look secure, or is there are a reason for you to be concerned? Wondering how to get a loan is one thing, but making sure you can pay for it is another. If you own a business, you should base your decision for a loan off of your receivables base and current cash flow. If your company is doing well, it may be time to start another venture.
How Will the Monthly Payments Affect Me?
Whether you need this loan for your business or for some upgrades around your home doesn’t really matter; how will the monthly payment affect you? Some find that it is all about the APR as to whether the payment will be affordable. Sit down and write out your budget, and include that new payment plan in there, too. Does your budget still look do-able on paper? You should always allow yourself a cushion should you have overages or unforeseen circumstances in the month. If you can make the payment without any worries, then the loan should be fine.
Loans For Bad Credit Rating
When it comes to getting a loan, your credit rating is key. The first thing any lender is going to do is pull your FICO score. If you are low on the scale, you can still get a loan through a program that offers loans for bad credit ratings. The higher your score, the better the interest rate you will get on your loan. However, remember you don’t have to have perfect credit to get the loan you need. You should check your credit score before you try getting a loan. Having an idea of what your number is will help you to make a wise decision on whether or not you need a loan. For businesses, the bank will look at your Dun and Bradstreet report, as well as the owner’s credit in some cases.
How Much Can I Borrow?
Your income dictates how much you can borrow. The debt to ratio needs to be in the proportion of about 40 percent for an approval. Businesses have the option to get a loan off of their receivables base while the average worker goes off of their paychecks. As a business, you can typically borrow up to 80 percent of what is owed to you. Using mezzanine debt rates, it is possible to get a great loan with incredible rates. For the average person, a loan will be based on your available income. If your debt-to-ratio is at 23 percent, lenders will typically allow a person to go up to around 40 percent. So, the difference in the two percentages is 17, and they will base a loan on that percentage of your income.
How Do I Get A Loan?
Getting a loan is not as hard as one might think. There are numerous ways to apply. Most lenders take telephone and internet applications, as well as those who want to stop by in person. If you want the best construction loan, it might be better to go in person and find out what the lender has to offer. If time is a big problem, doing an application over the phone or internet is not a problem. Getting a loan is rather easy these days — just as long as you have good income and a decent credit score.
Ready To Tackle a Big Project?
Those who are doing a property construction project might want to consider a mezzanine loan. If you want to get the best construction loan possible, mezzanine debt rates are affordable. Building and creating new things is always exciting, but having the right financial backing is just as important as the building itself. No matter what type of project you want to take on, ask yourself a few questions before going in debt with a loan.
Ready, Set-Go
The real key to getting a loan is making sure your credit and ability to repay the loan are possible. There are numerous ways to get financed, but before taking on the burden of another loan, you need to make sure that it makes good financial sense.
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Author: Tully Rickets
Tully is a freelance writer. He writes about personal finance and investing for a few companies including Car Search Brokers, a team of car brokers in Melbourne and Brisbane.
