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How to Apply for a Loan

Monday, 03 Jan 2011 03:35 PM

Whether you are reading a newspaper, watching television, or surfing the internet, you get to read about loans everywhere. This information can sometimes be overwhelming and may leave you more confused than ever.
These are the steps you need to follow to apply for the loan that is right for you:
1. Identify your needs: You may need a loan for several purposes whether it's buying a house or car, financing your children’s education, or just for a special occasion. Most lenders offer loans tailored to all of your specific requirements. For instance, a home loan has a low interest rate and a longer tenure compared to a car loan. So, the first step toward applying for a loan is to decide what you need it for.
2. Locate different options: Begin by finding out the various sources where you can get a loan and compare offers. You can obtain a loan from commercial banks, credit unions, government agencies, and even online lenders. The Internet is the best place to search for any kind of loan, including a home loan, student loan, and even bad credit loans. There are many websites that help you compare different lenders. Alternatively, you can have an in-person meeting with representatives of different banks to discuss your needs. The best thing about this option is that you can get all your queries answered directly.
3. Do your research: Find out what the interest rates are, how they vary with the loan amounts, what the payment plans are, what the repayment period is, and what are the other terms and conditions. Are there any redemption penalties if you wish to repay your loan early? Many financial institutions have a tiered structure where they charge a lower rate for higher sums. A long-term loan will give you smaller monthly installments, but it may come at a higher rate of interest. Also find out if there is any risk-based pricing for bad credit loans. All this information will help you decide on a loan that is most feasible for you.
4. Providing necessary documentation: Once you determine where you want to apply for the loan, half the job is done. You can then walk into the bank or fill out the application form online, if it is possible. This is a quick and easy way to apply for a loan. What documents you need to submit will depend on the kind of loan you are applying for and where you are applying. Check with your lender and make sure you have all the documents ready.
The bank may take a few days to process your application, and it will get in touch with you once your loan is approved. If you have bad credit and your loan does not get approved, you have several other options. One of them is a home equity loan that allows you to borrow money by mortgaging your house as collateral. This is a very attractive option in case you wish to borrow a large amount of money.
If you do not have a home to mortgage, you can opt for unsecured loans. An unsecured loan is obtained without collateral. It can be from a family member or friend, where you agree to pay back the loan within a specific time period.

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