Loans are a necessity in many facets of life; whether someone needs a mortgage or small business loan, borrowing money can help people progress in life and achieve great things. However, there are some things you should know before you apply for your next business loan.
Monitor Your Credit Report
Your credit score impacts more than just loan approval; based on your score, a lender will grant you different amounts to borrow and also calculate your interest rate. Those with poor credit who manage to get approved usually wind up facing loans that have exorbitant interest rates that can double or even triple their total repayment amount in the end. Before you apply, make sure you get a credit report and check for any errors. You can take steps to repair your own credit if you find errors in your credit report. Take some time to make payments on any outstanding debts before you apply as well. Raise your credit score as high as possible before submitting a loan request. When lenders run a hard check your report during the application process, it can lower your score. Thus, be sure to find out about the requirements of the lender you’re considering so that you don’t waste your time and hurt your credit report in the process.
You will most likely need recent bank statements and proof of income to get approved for a loan. This proof is typically requested in the form of last year’s tax documents. The lender may request more information, but at a minimum, having these documents on-hand when you apply will make the application and approval process go much more smoothly. Keep all of your documents in a safe place in your home or business. Also, avoid sharing any important and sensitive financial information online; the only time you should provide personal information to a lender online is if you have verified their company’s identity and are submitting through a secure, encrypted website. Never send your banking information, social security number, or other personal details to any lender through an email.
Plan Your Repayment
Discuss your loan repayment schedule with your lender. Some will allow you to pay off the loan early and forgo any added interest, while other lenders require you to pay the total amount for the duration of the loan. That means you might still have to pay the cost of a 12-month loan even if you are able to pay off the original amount sooner.
Getting a loan can seem overwhelming and confusing. There is a lot to consider and a lot of research to do. Fortunately, with patience, preparation, and planning, you can find the right business loan for you.
For more financial advice for you and your business, check out this article.