Most of us have typical dreams like having a home, eating anything, traveling anywhere and living life to its fullest. However, only few have the means to achieve it. That is where loans come into picture. Here, we’ll talk about the types of loan and how to get a bigger loan.
What is a Loan?
- Definition
Loan simply refers to the amount borrowed by a certain person from another person or establishment, which has financial resources.
- Common Types
There can be types of loan according to different factors:
- Secured & Unsecured Loans
Secured loans are borrowed money in exchange for a collateral. Examples of such are mortgage and car loans. In an event of failed payment, the house or the car may be confiscated.
Unsecured loans are borrowed money without any collateral. Examples are credit cards and signature loans. They usually have higher interest rates and when failed to pay the amount borrowed, the interests can accumulate.
- Revolving & Term Loans
Revolving loans refer to the method of borrowing money up to a certain limit. If the amount borrowed will be repaid, that will be the start to borrow money again until the limit is reached. Example of it is the use of credit card.
Term loans refer to the method of loaning in which it can be paid in installments but an interest is added to each subsequent installment to be paid. Examples are car loans and signature loans.
- Loan Providers
Loans can be availed of most commonly from the bank. They can also be acquired from other financial institutions referred to as lending companies. However, one must observe caution when doing so.
Higher interests lead to higher risks of not being able to pay and lower interests require you to have a reputation of a guaranteed payer. Although the moneylenders will offer you simple explanations, there may be fine prints in which you failed to notice but can be problematic when payment issues arise. There are ‘loan sharks’ out there who will feed on your gullibility and ignorance of the matter.
When to Decide that a Bigger Loan is Needed?
You can loan as much as the lender can able to provide you, granting that you pass the basic qualifications. There may be instances wherein you need an increased amount to loan. Here are some of the common situations that may grant you a high chance of being lent to:
- Business Loans – for increase in operating or expanding costs to yield more profits
- Auto Loans – for additional vehicle upgrade either in quality or quantity
- Home Loans – for renovation, home improvement or more property acquisition
- Medical Loans – for continuous availing of treatment
What are the Qualifications for Availing a Loan?
For those wanting to start a business, to qualify for any loan, one must have good impressions in all of the following:
- Credit score
All legitimate lenders will look at any potential borrower’s credit score. The score determines your reputation as a payer of borrowed money. That reputation will accumulate, which is termed as ‘credit history’.
Usually, lenders require that you have at least a credit score of 650. The higher your score is, the higher your chances of getting the loan. If you have no credits, it doesn’t mean that you have a score of zero.
It means that you have no experience having debts to pay. Lenders may be conflicted since they don’t have any basis for any level of guarantee. You may be required to present more documents or evidence of your payment capability.
Credit Star Funding, one of the best loan agencies, requires a credit score for as low as 620. They have a patented application to protect a loan applicant from publicly exposing the credit score to other banks in case he/she is denied from a loan application from a certain bank. The company can also help you acquire the funding you need without much hassle.
- Debt-to-credit ratio
Another term for this is DTI ratio. This is the measure of the amount of debt you have currently, or you usually take, against your monthly income. Depending on the type of loan, the required ratio varies. Most lending agencies set a maximum ratio of not exceeding 50 percent or 0.5.
- Intention of borrowed funds
Any statement of the intentions of the usage of funds can influence the success of availing the loan. You can hide your intentions through fabricated truths, but when issues arise and the lies are uncovered, you might be facing charges for fraudulent activity.
As much as possible, be honest in stating your intent of the fund’s usage. The most complicated way to prove intention is when trying to get business loans. You may need additional documents to convey your goals and how achievable they are.
- Additional requirements
For complicated evaluations such as for business loans, to have a wider perspective, a lender may require any, if not, all of the following:
- Potential collateral
This presents a security in case of default.
- Nature of business
Along with your intentions, you may need to present a timeline of your business and the projected cash flow for the near future.
- Annual revenue
For ongoing business, you may need to present our annual revenue as a determining factor to judge the amount you want to borrow.
- Net operating income
A lender will look if your business plan tends to get more income if the loan is granted since this will guarantee that you have the resources to pay in the near future.
What are the Methods of Availing Bigger Loans without Additional Qualifications?
Now that you know the common requirements or qualifications for availing loans, you can make some strategies on your financial situation. But, there may come a time that you may want even bigger loans than what you have just availed.
- Caution
You can borrow up to the maximum amount offered by the lender granted that you have improved in all aspects of the qualifications. If you haven’t, better start doing the following:
- Improve the credit score by dutifully paying previous debts.
- Lower the DTI ratio by either lowering the amount of existing debt or increasing your monthly income.
- Get a stable job with a regular salary that can enable you to pay the amount needed for your debts, at least in installments.
- Consider a secured loan if you can able to present a viable property as collateral.
- Considerations
Credit repair can be hard for many financial institutions. However, at Credit Star Funding, they are nearly 100 percent successful in cleaning bad credit report even in worse situations such as bankruptcies, repossessions, and more. If there is an urgency to borrow larger loans, without any additional requirements needed, you have to consider the following methods:
- Avail for a longer term in which you can reduce your monthly payment, but be cautious for it can make the loan expensive. It means that you might be paying off more interests than the principal amount.
- Show more income by involving a cosigner like your spouse. The accumulated monthly income from the two of you will ensure the lender that in case one of you has difficulty in reaching the amount, the other one will fill in. The more monthly income is guaranteed the larger loan can be availed.
- Continue to ensure the increase of your credit score by paying off existing debts, which in turn will also continue to lower your DTI ratio.
- Methods of Getting Bigger Loan
The methods of getting a bigger loan without additional qualifications are basically similar to getting a regular loan. After expounding on the qualifications, the following methods are easy to understand:
- Decide the amount to borrow based on what you need.
- Avail the right type of loan and the appropriate type of lender.
- Check your current credit score through the credit recording companies and other needed qualifications (discussed previously).
- Evaluate what type of loans and paying methods the lender offers.
- Checking the eligibility of the requirements needed by the lender and the annual percentage rate of interest (APR) listed.
- Compare the offer from multiple lenders if you have the time and want to have the best offer. You can also apply for preapproval.
- Gather the necessary documents, which indicate you are completely qualified, for identity confirmation, proof of address, income verification and employment certificate (if employed). Some common examples are valid ID cards, bank statements, and tax documents filed recently.
- Once you have passed the qualifications and fulfilled the previous steps, you can now fill out the application and submit it. Expect some time, at least a week, to receive the confirmation of approval.
In case you fail to comply a step, a good lender such as Credit Star Funding, will advise you what are your possible and practical options based on your current situation.
Conclusion
Financial situations requiring more money than what you have is a part of life. The existence of loans provides the opportunity to keep moving on and to meeting your needs and wants.
Knowledge and education are important in order to avoid making uninformed decisions. Credit Star Funding offers such services to their customers. They support their customers and help them ensure that the basic qualifications for a loan are met.
Each loan carries a responsibility. The bigger it is, the more responsibility you have and the higher the risk is to fail. The bottom line is you have to ensure that whatever amount you want to borrow, you can able to pay it and make the most of the funding you received.
