Loan Application – Special Features And Tips For Successful Application
To finance larger purchases, such as a vehicle, new home furnishings or even a property, it is often necessary to take out a loan. A loan can also sometimes be helpful for paying off bills or paying off an overdraft at your own house bank.
After all, the sums involved are usually quite large and cannot easily be financed by savings or regular salary payments. Loans are available for a wide variety of applications. As earmarked financing for a car, for a renovation project or as a specific credit line that can be used at the free disposal of the applicant. In the same way, a loan is not only important in the private environment. Companies also sometimes need loans to invest in new machinery or other assets. To ensure that everything runs smoothly and nothing important is forgotten when applying for a loan, there are a few basic things to consider. Especially when it comes to successfully taking out a small loan from a bank or financial institution, there are some hurdles to be overcome.
The loan application – the way to your desired sum
In addition to the traditional way of taking out a loan from a bank, there are now a number of other lenders. These often specialise in selling financial products via the Internet. Loan applications are usually accepted according to a standardised checking procedure – or are quickly rejected, leaving the applicant without the desired funds. It is therefore all the more important to prepare a loan application very well in order to actually receive the desired sum in the end. There are many specifications that must be taken into account. For example, it is necessary to submit many documents about the personal circumstances as well as proof of assets. It is therefore best to prepare an individual checklist so that all relevant information for the application is taken into consideration. This way you can be sure that you are well prepared. Only when everything is complete can the loan application be processed and – even more importantly – approved.
A checklist – useful for the personal credit application
The first step for the credit checklist can be to think about a few important features about the credit. These would be things like:
– The desired loan amount…
Depending on the intended purpose, the payout sum is of course different. The higher the loan amount, the more costs may arise, for example for processing.
– The intended purpose
Some institutions grant their loans only for specific purposes. For example, a bank may offer an installment loan to finance a new vehicle or the renovation of your home. The conditions for this could be tailored exactly to this credit line. A loan for a general purpose, i.e. which is not tied to a fixed commitment and the amount can be spent for any desired purpose, may be subject to higher costs.
– Term of the credit and interest incurred
Of course, the term of a loan can also influence the interest rate to be paid. Financial institutions often highlight their low interest rates as a good offer. However, it is important to remember that a low interest rate at the moment is a guarantee for a good credit offer, but this is not always correct. Often it is the variable interest rate. This means that the banks always adjust it to the currently prevailing interest rate level. And this in turn is set by the Central Bank (CB), so that it is always passed on to the customer in the appropriate amount. Accordingly, a low interest rate valid at the time of application can grow during the credit period at a higher interest rate than originally thought. One consideration when applying for a loan is therefore
– The interest rate
This is the basis for the selection of a variable or fixed interest rate when the application is submitted. In contrast to the variable interest rate mentioned above, a loan with a fixed interest rate over the entire term is not negotiable and cannot be changed. This may not seem so attractive at the moment; however, as a borrower, you do not have to fear any increase and are virtually independent of the key interest rate.
In advance, the applicant should also consider possible early repayment options. This could be a special repayment, for example. This makes it possible to repay the loan prematurely either in the entire remaining amount or a partial amount. The advantage of such an agreement is that if the borrower has additional funds available over time, the total loan and interest burden can be reduced and the loan term shortened.
Another issue that may also be important for a loan application is personal collateral. Credit institutions often only grant their loans if the borrower has appropriate collateral. This is intended to absorb any default on payment, for example if the salary is lost or, in the worst case – the death of the customer. For this purpose, the following point should be included in the checklist:
– Does the credit offer also include a so-called residual debt insurance? This is offered by many financial service providers and takes over, for example, the continuation of the loan instalments in the event of the death of the borrower. This is especially important for families, so that the relatives do not get into financial difficulties due to the installments. Accepted in the context of loan collateral is, among other things, land and property ownership or income from rent payments. If the applicant for a loan cannot offer any or only insufficient collateral, it is still possible to obtain a loan. But then often only with poorer conditions, which can result in considerably higher installment payments, for example.
Basic requirements for applying for a loan
The criteria for a loan application naturally vary from institution to institution. The General Terms and Conditions of Loans of the individual institutions always contain the most up-to-date information. Ultimately, every customer would like to apply for a different loan amount and has different requirements in terms of duration, interest and repayment terms. Nevertheless, there are practically a few basic requirements that you can note down for your checklist as an applicant. As a rule, these are the following aspects:
- The applicant must be of legal age
- Personal data (form for a self-disclosure)
- An existing residence in UK
- An account connection exists in UK
- Regular income of the applicant
- Sufficient creditworthiness or collateral
Not to forget, if the borrower is not in an employment relationship:
– In the case of self-employed applicants or freelancers, the income tax assessment of the last three years and a statement of income and expenditure. Sometimes this can also be the so-called Business Assessment (BWA), which can be prepared by a tax consultant, for example.
If the credit is to be used for free use, it is also not necessary to specify the intended use in the application. In addition to a wage payment, pension income, rental income, income from self-employment or rental income can also be considered income or receipts – with the respective proofs. On the expenditure side, the applicant should include the following in his or her checklist:
- Rental payments including additional costs
- Expenditure on insurance contracts
- other, already existing credit obligations
- possible maintenance payments
As far as creditworthiness is concerned, the credit institutions adopt different approaches. This term refers to the so-called creditworthiness of an applicant. This is usually queried by various credit agencies with the help of a credit score. This can be, for example, the Experian (protective association for general credit security). The result is sent to the lending institution. This criterion is often used for positive lending. However, this has nothing to do with the applicant’s current account balance. The procedure is about the assessment of income and expenditure made by the borrower. This is intended to check to what extent a fairly balanced relationship exists here. In addition, the financial service providers use it to calculate what the customer’s payment behaviour has looked like in the past and will play a role in future creditworthiness assessments.
If the desired credit is perhaps to be used to reschedule a overdraft facility or other credit, the checklist should contain information on how:
- The respective financial institution with which the credit was concluded
- The account number and bank code of the credit institution
- The repayment term
- The corresponding remaining sum
- If available – a power of attorney to redeem
The other way to your desired credit – online credit comparisons
Before the actual credit application is made, comparisons of the various offers are of course very useful. In the environment of all financial business activities, the following applies: Not every credit offer includes the same conditions as the offer of the neighbouring bank; even if both are even in the same location. Beside the classical offers of the own house bank, to it nowadays likewise special web pages for on-line credit comparisons belong. Because – to compare the respective conditions of conventional banking institutions with one another is very complex and costs much time. Corresponding comparison portals can provide remedy here. They list the desired offers including duration, interest rates, costs and the necessary documents, or the procedure for the application. In this way, it quickly becomes clear which credit offer is the most sensible and suitable for the individual customer. Comparison portals can also be helpful for the application process. Most portals offer an overview of which documents are necessary for a successful application. Some comparison portals allow the submission of evidence online. In the case of online submissions, a postal service procedure is usually used to identify the applicant. This is required:
- A currently valid identification document from the applicant
- If there are several borrowers, including, for example, the spouse, the identity cards of all persons
- A completed Postident coupon
- Signed credit application and documents in a sealed envelope
In addition, it should be noted that, even in the case of online portals, the applicant does not necessarily have to forego further advice on any questions that may arise. Many providers provide chat rooms or contact forms specially set up for this purpose. Telephone contact with a credit advisor is also often made possible. The checklist should also take into account whether such customer service is actually available from an online credit provider.
The loan application – with good preparation for the personal loan of your choice
A good and intensive preparation is everything. This also applies to the application for a loan. Whether you prefer to consult your own house bank, visit several credit institutions and have a personal conversation with an advisor or favour corresponding comparisons via online portals – in any case, a checklist for the application is always very useful. Once you have ticked off all the points there – in the truest sense of the word – you are on the safe side that you have not forgotten any relevant things. Especially for a personal consultation at a bank this is a great help and should not be underestimated.
The applicant can answer the consultant’s questions and does not need to be unsettled during the interview. In addition, he can appear confident, as he has already familiarized himself in detail with the subject of lending thanks to the checklist. Ultimately, the best for the future borrower can be selected from the wide range of offers. These characteristics also apply to applications submitted via channels other than the usual bank loans – such as “crowdfunding offers”. Once all requirements have been met, there is nothing to stop the desired loan amount being paid out quickly and easily. This shows that, with a few tips and thorough preparation, the path to your own credit wish can be quickly and easily followed without any questions.