Borrowing money can be a tricky business. When borrowing money, it is important to know the nature of how the loaning business works, including when to engage it, or when to avoid it. By understanding the loaning industry, you can make more informed decisions about your financial affairs.
Loans Defined
A loan is money, property, or other material goods given to another party in exchange for future repayment of the loan value or principal amount, along with interest or finance charges. A loan may be for a specific, one-time amount or can be available as an open-ended line of credit up to a specified limit or ceiling amount.
Corporations, financial institutions (like Nimble quick loans online) and the government typically issue loans. So why do these institutions let people borrow money? Loans allow for growth in the overall money supply in an economy and open up competition by lending to new businesses. Loans also help existing companies expand their operations. The interest and fees from loans are a primary source of revenue for many banks, as well as some retailers through the use of credit facilities and credit cards. They can also take the form of bonds and certificates of deposit.
Loan Qualifications
Getting a loan means you have to be qualified for the loanable amount. Here are a couple of items you have to check for you to be qualified.
- Income
Your income is your ticket to be able to pay for your loans, which is the reason why nearly all lenders will require evidence for a steady source of income. This is to make sure that you, as the borrower, will have the ability to pay your debt regularly and in a timely manner.
- Employment
There are some lenders which will require evidence for proof of employment, while some lenders will just require a national or government ID. Nonetheless, employment has a positive impact to increase your chances to be qualified for a loan. In addition, some lenders would even go deeper and ask your job title, especially if the loan amount is pretty significant. They do this for the following reasons:
- Some lenders cross-reference your job title with your salary to as a protection against fraud;
- Some lenders use your job title for interest rates. For example, in the same loan amount that a doctor and an admin worker would like to borrow, the doctor may have higher interest rates.
- Credit History
Making sure that your credit history is excellent and flawless with a solid history is a crucial factor for being qualified to loan. You have to make sure that you pay your credit card ahead of time and that there are no missed payments or loan defaults because this is the easiest way for money lenders to track your financial history and capability, and make decisions whether you qualify for a loan.
- Assets, Debts, and Expenses
In your loan application, you will be asked to list down all your assets, debts, and expenses. Lenders would then have the process to use your debt and income to calculate the loan amount you are qualified for. More income increases your chances to qualify for a loan, while debts such as credit cards, store cards, and other loans can hinder your application. Expenses are always estimated, but lenders generally have a good idea when you’re under- or overestimating based on the data of other customers.