The question “what do I need to apply for a loan” is a question frequently asked by people who want to apply for loans. For those persons who wish to apply for a loan; there are some requirements and documents that you will be needing.
You will find out about the documents needed and the requirements in this article. These documents will show your personal and financial information; the lender must review them before deciding to go you a loan.
Applying for a loan will seem very difficult to you if you do not know how to go about it and if you do not know the right documents and requirements. And that is why you need to read this article.
Here in this article, you will be enlightened on what you need to apply for a loan and how you can apply for a loan. When you follow the steps laid down in this article, securing a loan will become an easy thing for you.
The Requirements You Need to Apply for A Loan
If you are asking “what do I need to apply for a loan”, your question will be answered in this section of the article. Requirements or need to apply for a loan vary. It depends on the lender. But listed below are the common requirements for a loan.
- Income.
- Debt-to-income ratio.
- Credit score and history.
- Collateral.
- Financial statements.
- Personal information.
- Business plan.
- Purpose of the loan.
1. Income
Lenders and banks are very concerned about your income, this is because it will determine if you have the source of paying back your loan. The bank or lender will want to know if your business generates enough cash to repay the loan on time.
2. Debt-To-Income Ratio
Lenders make use of the debt-to-income ratio to determine a potential borrower’s ability to make payments on new and current debts.
3. Credit Score and History
Your credit score is required to apply for a loan. A credit score is not just needed; you will need to have a high credit score to apply for a loan. Credit scores are from 300 to 850, and some lenders require a minimum score of 600 to enable you to qualify for a loan.
4. Collateral
Your lender will require you to drop a valuable asset or collateral for your loan. And if you fail to make your payments, or you default on your loan, the lender will have to take possession of your collateral.
5. Financial Statements
To apply for a loan, you will need to submit your financial statements. Your lender will expect you to submit;
- A balance sheets.
- Cash flow statement.
- Income statement.
- Business bank account balances.
- Profit and loss statements.
6. You Need your Personal Information to Apply for a Loan
Your personal information will also be needed to apply for a loan. Some of this information includes;
- Criminal record.
- Assets.
- Tax returns.
- Personal loan balances.
- Information on your education.
- Your address.
- Financial statements.
7. Business Plan
When applying for a loan, you may be asked to submit your business plan. This will help the bank to decide the right amount to give to you.
8. You Need to Know the Purpose of The Loan
Your lender will also ask for the reason why you need the loan. So you will need to prove why you need the loan.
Steps to Apply for A Loan
Once you have what you need to apply for a loan, the next step will be to apply for the loan. To apply for a loan, you have to follow the steps below.
- Know how much you need.
- Check your credit score.
- Pre-qualify for a loan.
- Compare offers and choose your lender.
- Get the required documents.
- Submit your application.
- Then wait for approval and funding.
1. Know how Much You Need
At times you might not need to visit a lender to apply for a loan. But this is determined by how much you want. So, you need to know how much you want.
When you are sure of how much you want, you can then decide to go to a lender or borrow from your friends.
2. Check Your Credit Score
Before you apply for a loan, you need to first check your credit score. You must check it because the loan you will receive and the interest rate will be determined by your credit score.
So, when you check your credit score, you will have the opportunity to fix it if need be before applying for a loan.
3. Pre-Qualify for A Loan
There are some banks and online lenders that let you pre-qualify for a loan on a desktop or mobile device. Engaging in this act will give you an estimate of the monthly payment, rates, and terms before you submit your application.
4. Compare Offers and Choose Your Lender
There will be offers from different lenders, what you need to do is to compare their offers, then choose a lender.
5. Get the Required Documents
After you have compared different offers and chosen a lender, the next thing will be to gather your documents. The documents you will be needing are:
- Proof of identity.
- Loan application.
- Employer and income verification.
- Proof of address.
- Your education history. This should include the highest degree you have earned, and also your date of graduation.
- Social Security number. This will be needed if you did not submit it during your pre-qualification.
- Preferred bank account for deposit.
6. Submit Your Application
After getting the required document, you have to read the terms and conditions of the loan carefully. If you accept the terms, you can then go ahead to submit your application.
7. Then Wait for Approval and Funding
After submitting your application, you have to wait for approval before you can get funded. How quickly you get the loan will be determined by the lender. At times, you can get the money that same day. Also, you can get it after five working days or so.