Get a better loan by knowing some of these industry tricks.
It’s well known that lenders consider your credit score, income and financial stability when assessing your eligibility for a personal loan. However, hidden behind these obvious considerations are a number of tricks of the trade that lenders know about… and you should too.
Here are four insider secrets to consider when comparing personal loans:
The interest rate of a personal loan is only the beginning and may not actually give you a full picture of what your loan costs. The fees and type of interest rate should also be considered alongside the rate percentage so that you can see how much the loan will actually cost throughout the term.
The Annual Percentage Rate (APR) gives you a better idea of the total cost of your loan, but keep in mind that penalty fees for things like early payoff or late payments usually aren’t included in the APR. If you suspect that you’ll pay off your loan early, consider looking for a loan with no prepayment penalties.
A personal loan calculator is a great tool to help you visualize how much your loan could cost. You can put in different values to compare costs and decide what loan amount and terms you can ultimately afford.
A lender might find itself in hot water if it were to deny a loan application based on age alone. This would be a clear case of age discrimination. However, your life stage can often a play a part in whether you are approved or not, and older or younger individuals may have a harder time finding a loan.
At the end of the day, lenders are primarily interested in the odds of being repaid in full. When a lender’s historic experience says that certain age groups can’t be trusted as readily as others to repay the loan, they may approve and decline applications accordingly.
It can be difficult for an 18-year-old or a retiree to find a personal loan. You can’t suddenly change your age, but you can compensate for your age by showing other indications of financial reliability such as a low debt-to-income ratio and a high credit score.
Would you lend yourself money based on these four important factors?
You can easily get your credit reports and credit score online.
What’s the difference between your credit score and credit history? They’re not quite the same thing and many lenders will consider both.
If you’re looking for a loan, you should probably know your credit score. This is a three-digit number that lenders use to get a snapshot of your financial strength.
For a more in depth look at your needs, lenders also consider your credit history. This is a detailed record of relevant transactions, including open credit accounts, recent inquiries, bankruptcies, defaults and more. Repairing an imperfect credit report can be more difficult than improving your credit score, but both are important.
Sometimes your application might be declined by a “robot” without a human ever setting eyes on it. This is often more prevalent with online lenders, because it’s one of the ways they can offer fast approval, sometimes within the hour.
Banks and lenders often use their own algorithms to check loan applications, automatically sorting the low-risk applications from the high-risk applications to preapprove strong applicants. It can be a way of weeding out prospective borrowers who don’t meet the initial eligibility criteria. If you’re considering applying with a lender that offers preapproval, it’s often worth reviewing their eligibility requirements to avoid wasting time and on applications that go nowhere.
Four personal loan secrets you need to know:
1. Rates aren’t everything.
2. Lenders may consider personal factors.
3. Your credit history is different from your credit score.
4. A computer bot could approve or deny your application.
Knowing all the industry tricks inside and out will be of limited help if you’re not choosing the loan that’s the right fit for you. To get the most out of your financing, start by comparing your loan options to find the best one for you.