Almost everyone has ever had a quick, consumer or mortgage loan.
It happened because as much as a good salary we get, money is still out of reach, something unpredictable or simply because we want to make a bigger purchase, but we can not save so much that we can buy it without looking the services of a bank or non-banking financial institution .
And then, when we have to look for loan, we ask the question not only where to apply, but whether we will be approved if we do.
Although in the media space can be found quite detailed information about the conditions we have to answer in order to be granted a loan , confusion and uncertainty there is always and that is exactly what we are going to talk about …
Terms of approval for lending by bank and non-bank financial institutions
If you also intend to apply for a loan , then you should carefully consider whether to contact a bank or a loan institution.
If the loan you need is a small amount (up to $ 500 or $ 2000, for example) and you need it fast, the better (and quicker) solution would be to apply for a quick loan from a loan company .
However, if you need a large consumer (over $ 5,000) or a mortgage loan , then the more appropriate solution is to target a banking organization.
However, it is good to know that either of the two options you choose to be approved by both the bank and the loan company will check and assess your loanworthiness, which most often includes:
Check loan history
This means that at the moment you apply for a loan, the loan institution will consult your loan history on your loan history . The report is compulsorily made by all loan institutions and the data they receive is for a period of five years.
So if you have untapped loans or delays in payments even years ago, your loan approval may not be possible. In this case, the good news is that both bank and non-bank organizations have internal rules and conditions and can lend in their own discretion if they decide.
The other important condition that you need to meet is to have a secure and steady income. The difference in the approach of bank and non-bank companies is that if you apply for a quick loan from a loan company , you will not require that you provide a proof of your income that must be issued by your employer until you seek a consumer loan from a bank, this condition is mandatory in 99% of cases.
The fact that loan companies will not require you to provide them with a signed and stamped income document does not make you think you can lie, as you also have the requirement to have a permanent income (under a labor contract, from fees, rents and rents, income you learn if you practice liberal professions, etc.). Just their conditions are a little lighter, but no one will approve of you just because of your beautiful eyes.
Collateral and guarantors
In cases where the amount of loan is higher , one of the conditions for approval, which almost all banks and some of the loan companies require, is to be provided with a collateral or loan guarantor.
The collateral can be a bank guarantee in favor of the loan company from which you will want a loan, a mortgage on a real estate or something else.
Guarantor (s) are required again if you need a larger amount to be granted. Then the bank or non-bank organization needs someone else who will not only guarantee you, but also be in solidarity with you to fulfill your loan obligations.
Debt – income ratio
This condition is most often underestimated by borrowers, but is in fact one of the most important (especially for banks) and often stumbles upon the approval of the loan.
What does the debt-to-income ratio mean?
Banking institutions have their own internal banking standards where they approve or not the loan. At the moment you apply for a loan, the bank will ask you what your monthly income is (yours and yours), how much your household is, how much you pay (the monthly installment + interest), whether you have movable and real estate, whether you have extra income .
On the basis of this information and on the basis of the amount of the loan (the monthly installment + the interest you have to repay), which you want to be granted, you will calculate what is the debt-to-income ratio . If, after calculating all costs, it turns out that your debts exceed 40% of your monthly income, your loan application may be rejected.
Each loan institution has its own minimum monthly income requirements for a member of the household on the basis of which it can decide whether or not you qualify for it and thus grant you the loan or not.
Unlike banking institutions, in loan companies the debt-to-income calculation is mostly left to you, and it is up to you to decide whether you will be sufficiently responsible to calculate the loan calculator for what installment and for how many months you will be able to repay the loan to negatively affect the income of your family.
It is good to know, however, that here is the rule of not trying to lie, because although the debt-to-income requirements are not as stringent as banks, and loan companies will hardly lend you if you say, that your monthly income is 500 leva and the monthly installments you will pay will be 250 – 300 leva.
Adulthood and permanent address
In fact, this is the first of the loan approval terms and it does not matter if you go to a bank branch or you will sit behind the computer at home and fill out the loan application form with a loan company. Do not have a full 18 years old , do you have a valid ID and do not have a permanent address , it just does not make sense to try to borrow.
Every bank and non-bank financial organization in the country has the right to approve or not the loan applications, except according to the legal regulations adopted and according to its internal rules and regulations .
How do you prepare yourself so that you have more chances to be approved for a loan?
You will say that it is very easy to answer this question – you just have to meet the conditions of banks and loan companies … and that’s right. However, there is a way to prepare yourself to reduce the rejection rate of your application.
To do so – you should not make a hasty decision. Because it is often the case for borrowers to start with tours of banks or loan companies and try in all ways to secure a loan, believing that even if they do not meet all conditions, any bank or loan company will not do the job well somehow they will pass between drops and will be approved.
These attempts usually end with a denial not because banks do not want to grant loan but because the borrower has not even tried to think a little more carefully whether he meets the general conditions.
So do not rush into applying and decide for yourself:
- Do you really have an urgent need for a loan?
- how much big loan you need;
- will you be able to pay it safely;
- do you have and how old are your loan obligations?
- over the past 5 years, have loans that have remained untapped. (If you do not remember whether or not you have unsecured loans, you can also check yourself in the loan Register with the BNB).
After answering all of these questions and thinking that you really need loan that you can easily repay … do not be in a hurry again, but find the bank or non-banking organization that offers you the most advantageous conditions .
Go to their pages, read what their requirements are, their general terms, calculate approximately how many months you will be able to repay your loan, and how many percent of the cost you can afford to pay per month. Take a look at their terms and conditions in case you delay payment of installment.
Prepare all the documents that may be requested from banking organizations. Only after you have finished and with this you have stopped at a specific financial institution, you can apply and be assured that you will meet their conditions and you will be approved for a loan.
Also, remember that in order to get an answer whether you are approved or not, it requires a certain technological time. For example, if you are targeting a consumer loan institution after meeting the loan inspector and providing him with all the documents, you will have to wait for the decision for at least a few days, as the approval of bank loans takes longer.
If you are applying for a quick loan at a salary or a loan from a loan company, the time they will examine you and decide whether you are eligible or shortened to a maximum of 30 minutes.
The difference in approval time between banks and loan companies comes from the fact that the amounts that the fast-lending companies provide are small in size and the loans are not secured. Of course, in both cases, if you’ve taken loan before, and you were correct and you were eligible, there is a possibility that your loan will be automatically approved.
What does one loan agreement contain?
Typically, when they get the coveted “Yes” from the loan company, a very large portion of the borrowers simply pick up the documents, sign up where they are told and come out happy with the bank that they already have the money.
This is a pretty big mistake, because if you do not know what you sign up for, then it can make you a very bad joke. Therefore, let’s assume that you have applied for a loan, you are eligible and you should sign a contract with the bank or non-bank financial institution.
Before you make sure you make sure that the contract contains the following:
- date and place of conclusion of the contract;
- your personal details (PIN, ID card, ID number, date of issue of the ID card);
- loan company (address, registered office, UIC or Bulstat, name of the bank or non-banking organization);
- the type, amount, conditions of utilization and the duration of the loan granted,
- interest rate, APR, and the total amount you owe at the time of signing the contract;
- the type of the repayment plan ;
- your rights and obligations as a borrower ;
- the rights and obligations of the loan or banking organization as a lender;
- the interest rate you will be due if you delay payments;
- what the consequences will be if you have defaults or do not serve your loan;
- do you have the right to repay your loan early and if “Yes” under what conditions?
- can you cancel the contract and under what conditions you can do it;
- in which cases you can make use of out- of- court dispute resolution;
- the address of the Consumer Protection Commission ;
- a place to sign you as a borrower and a signature of the lender (bank or loan company).
If you do not understand any point in the contract, ask questions until you are completely convinced that you are aware of what you are signing.
If necessary, sign up with a loan consultant to review the contract and clarify if any of the conditions are not clear to you.
To put a point on the subject we can say the following …
The terms of loan approval are neither draconian nor too complicated to implement. If you are responsible for yourself, your family and your banking and non-banking institutions, and you do not have untapped loans or deferred contributions , if you are an adult and you have permanent income, your chance to be approved for a loan is very large.
Be perfectly honest and honest, judge correctly whether you really need a loan, read the smallest font in the loan agreement before signing it and everything will be fine.
And do not forget that if something is not clear you can look for answers to questions from loan consultants, or if you have doubts, you can contact the CPC whose job is to monitor compliance with the law.