There are many situations where you may need to bridge a financial gap by borrowing funds, and in the highly digital financial landscape, many people find themselves considering applying for an online loan. This is becoming more and more common, but many people may be hesitant to do so because they don’t know what exactly the application is going to entail. We’re going to take a look at the most important things you need to know before applying for a loan online.
The most important things to be familiar with and to prepare before you apply for an online loan are your credit history and the resulting credit score. Not only will it give your potential lender most of the information they will consider during your loan application, but it gives them a quick assessment of your general creditworthiness. Credit scores can range from 300 up to 850 and are based on the information in your credit history.
Your credit history will contain a record of all commercial lending and repayment information linked to your social security number. Any debts that are in collections will be listed, along with any current loans, credit cards, balances, and your entire payment history for the last 7 years, including late payments and how late they were.
Many lenders will determine how much you are allowed to borrow based on how much you make. Your income will dictate what you can afford to reasonably repay, and your income will depend on your employment.
In addition to making sure that you have the means to repay the loan you may potentially take out, many lenders will have requirements for how long the borrower will need to have been employed. Before being approved for a loan you may be required to produce documentation to prove one or more of these criteria.
Your debt-to-income ratio, or DTI, represents the percentage of your income that is already devoted to paying monthly debt. This debt consists not only of credit card payments and personal loans but also things like your mortgage or car payment.
Most lenders will have their particular cutoffs for DTI. For example, some may not approve any borrowers with more than 40%, while others may lend to those with DTI as high as 60% if they meet other qualifications.
Secured personal loans will generally require some type of collateral, such as assets or property, to secure the loan. With mortgages, for example, the collateral is the house, and with an auto loan, the collateral is the car. Sometimes the collateral will be related to the loan in some way, though many personal loans can be secured by other assets such as investments, collectibles, or even real estate.
There is a lot to consider when applying online to borrow money. If you are thinking about applying for an online loan, reach out to the loan experts at Lending Bear to talk about various options that may work for you.