Getting a loan can be one of the first adult steps a young person can make, as well as a life changing event, even for an adult. Loans come in many shapes and sizes from small personal loans to help with the bills, to loans for larger purchases such as a car or home. However, the type of loan you choose and the steps to getting that loan can often be unknown or at best, confusing.
Regardless of what kind of loan you are looking for there are some steps which are universal to the process of obtaining a loan. While your credit and financial situation are a major component, there are other loan options, which are surprisingly easy , and others that come with a much higher risk.
By knowing your options and the risk-reward of those options you are more likely to obtain the loan you are looking for.
1) Establish credit
Credit, beyond most others, will be one of the primary factors in determining loan eligibility, your interest rate and loan amount. Good credit can go a long way in helping you save money, while poor credit can make it nearly impossible to get a loan.
Establishing and maintaining good credit is a simple formula as long as you do it correctly. To establish and maintain good credit you must:
• Establish an existing line of credit over time such as credit cards and small loans. Most people begin their credit history with credit cards.
• Make timely payments, and don’t miss any of your monthly payments, even if you are just making the minimum payment.
• Try to utilize no more than 20% of available credit. This shows lenders you have the ability to manage your credit, while not abusing the privilege.
By establishing and maintaining good credit you are setting yourself up for many more options than available to those with poor credit.
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