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Things to Remember Before Applying for a Loan


If you are opting for a loan application for the first time, you need to pay attention to its prerequisites. Acquiring credits is very easy but paying for your loan can be practically difficult, especially if you have just dived into it without knowing the ifs and buts associated with the loan.

There a few critical things you need to keep in mind before making a loan like your credit score, your monthly income, your expenses, the amount you save and the most important, the purpose of loan application. If you want to know in brief about the basics to apply for the loan so that you do not have to suffer during the repayment period, you can find out more here.


Top Things to Consider Before You Apply for a Loan

To make a loan is a personalised thing for each and everyone in terms of the amount and the purpose. Without considering the uniqueness certain things must be commonly taken into consideration by all the loan applicants, they are detailed as follows:

Income:

While you go for a loan, you must consider your overall revenue from all the sources to know your self-capability for loan repayment. Your income is an important thing to keep in mind before you apply for a loan. You cannot just ask for any amount of loan. In fact, you need to show proof of income at the time of loan application, and the amount of loan depends on your income to some extent. You may need your salary statements from your employer, or W-2 forms etc., in case you have a job, or if you are self-employed, then you need to show your income tax return files for more than 2 years.

Credit History:

Yes, you heard it right. Your credit history defines your image and repayment capability in front of the lender. Your past and present credit score help you to acquire a loan on your terms and conditions if you have maintained it smooth all the time.

If you feel your credit score is not up to the mark, it is advisable to delay your plan for acquiring the loan and first maintain your credit score. It would help you to receive a loan on a reduced interest rate and can also be a deciding factor for the repayment period. You may initially not understand the importance of interest rate with a difference of 1 or 2%, but it makes a huge difference in overall calculation.

Your Assets and Liabilities:

Your income is just one side of the coin but to know your net worth the lender may consider the properties or your valuable personal assets like Gold, Investment Accounts etc. that adds value to your monetary funds in some of the other ways.

Along with that your monthly expenses and debts are also taken into consideration. The ratio of your income and liabilities is critical to know if you are in condition for the repayment of the new loan or not. If 70% of your total revenue is already engaged in repayment of past loans and mortgages, it is preferred not to opt for any other kind of loan.

Final Words:

It is good to maintain a financial check and self-analysis for at least 4 to 5 months when you are planning to go for a loan. It can help you decide whether or not you should opt for a loan in the present situation. If yes, what amount you should plan keeping in mind the interest rates. To be in the stress-free case your income+savings must always be greater than your debts and repayments. 

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