Credit plays an important role, but it is not the only determining factor.
You want to apply for a mortgage, the car loan or a personal loan, put your best foot forward, but it can be difficult when you do not know what your lender is looking for do. As you probably know, they usually look at your credit score, but this is not the only factor to consider when you decide whether to cooperate with the banks and other financial institutions. Here are seven, you should know.
1. Your credit
Almost all lenders look at your credit score and report, because it gives them insight, you can manage borrowed money. Bad credit history shows increased risk of default. This scare many lenders, as is the opportunity they may not get back what they lend you.
Scores range from 300-850 with two of the most popular credit scoring model, FICO® score and VantageScore, and the higher your score, the better. Lenders, because they think their scores combined with the following factors are usually not open a minimum credit score, in part. But if you want to get the best chance of success, aims at 700S 800S or score.
2. Your income and employment history of
Lenders want to know that you will be able to pay back what you borrow, and as such, they need to see you have enough and consistent income. Income requirements vary the amount you borrowed, but usually, if you borrow more money, lenders need to see higher incomes are confident that you can keep up with the payments.
You also need to be able to demonstrate stable employment. Those who only a year or self-employed persons working part time just to get a loan to start his career might be more difficult than those who work for the establishment of the company throughout the year.
3. Your debt-to-income ratio
Is closely related to your income is your debt to income ratio. It looks like your monthly debt as a percentage of your monthly income. Lenders want to see a lower ratio of debt to income, if your ratio is greater than 43% – let your debt take up no more than 43% of your income – Most mortgage lenders will not accept you.
You can still getTo loans, debt-to-income ratio is more than this amount, if your income is high reasonablŸ, your credit is good, but some lenders will refuse you, rather than take the risk. Work to pay off your existing debts, if you have any, and before applying for a mortgage, so your debt-to-income ratio fell to less than 43%.
4. Your collateral value
Collateral you agree that if you can not keep your loan payments to the bank stuff. Involving collateral loans are called secured loans and those without collateral are considered unsecured loans. Mortgage interest rates are usually lower than unsecured loans because banks have the means, if you do not pay to recover their money.
Part of your collateral will also determine how much value you can borrow. For example, you buy a home, you can not than the current value of the home by the Ministry of Railways when Ë. This is because the bank needs to ensure that it will be able to get back all the money, if you can not keep up with payments.
5. Down payment
Some lenders require a down payment and the size of your down payment determines how much money you need to borrow. If, for example, you buy a car, to be more up, means you will not need to borrow money from the bank ago. In some cases, you can get a loan without a down payment or with a small down payment, but to understand that, you will pay more interest over the loan term, if you go this route.
6. Current assets
Lenders want to see that you have a savings or money market account some of the cash, or assets, you can easily exceed the money into cash, you are using your down payment. That even in the face of temporary setbacks, like a lost their jobs so that people feel at ease, you can still keep up with your payments until you get back on your feet. If you do not have much cash saved up, you may have to pay higher interest rates.
7. Loan period
Your financial situation may not change much for a year or two-year course, but in 10 years or more in the process, it is possible that your situation may occur lot The change. Sometimes these changes are good, but if they get worse, they may affect your ability to repay your loan. Lenders will usually feel more comfortable lending you money in a short time, because you are more likely to be able in the near future to repay the loan.
A shorter loan term also save more money for you, because you will pay less in interest. However, you have a higher monthly payment, so you have to decide what the loan is suitable for your weight, this.
Understanding of the factors, lenders when evaluating loan applications, can help you improve your chances of success are considered. If you believe that any of these factors may harm your approval chances to take measures to improve before applying.