If you have ever applied for a loan successfully, you know the effort is required, especially where you have to meet the lender. But as a business person, you are supposed to be acquainted with some of the questions that lenders are likely to ask. Not all applications are always accepted. A good number are declined due to the failure by the lender to respond to the question’s lenders ask effectively. It is vital to prepare yourself to face the lender, and this means getting ready to respond to the questions that will be asked. Especially when you borrow from a licensed money lender be prepared to respond to questions.
We are sorry if you are allergic to intuition. You will have to go through it because you are desperate for funds. The process of the loan application can be quite intimidating. Going through questions and effectively responding to them is inevitable. Nevertheless, it may not be as bad as it might appear. You can answer the questions appropriately, mainly because the person asking may not know you. You will be responding to a stranger, and there is no need to be afraid. Preparing yourself to meet a lender involves carrying out some research on some questions likely to be asked and how to respond to them objectively.
While it might appear as though the lender is evaluating you, you may make things two-way traffic and use the opportunity to evaluate the lender. It is advisable to always evaluate lenders and their offers before deciding on who to deal with. It would be best if you always aimed at getting the best deal ever. The lender needs to ask as many questions as possible, and it is also essential that you do the same. Choosing a lender to deal with is a very significant decision that might impact your financial standing for long. Incontrovertible, lenders will use lots of financing vocabularies. These terminologies will be used repeatedly while deliberating on your loan. Pay attention to the following question that lenders often ask before giving you credit.
1. What Is Your Job Status?
Every lender will be interested in knowing borrowers’ employment conditions. They need to know whether a borrower is employed. Ideally, lenders prefer dealing with borrowers who have been in the same job for long, or at least two years. Determining your stability is the motive behind this question. The longer a borrower has been on the same job, the higher the possibility of being approved for the loan.
Stability is even more essential for individuals who intend to be homeowners. You don’t have to complicate everything by changing employment. Changing jobs before being approved for a job is one of the most critical financial mistakes you can ever make. Do your best to avoid such issues.
When applying for personal loans, job status is also vital. This especially the case when you have bad credit. In this case, you have to prove to the lender that you are creditworthy and stability is the best way of doing that. Apart from maintaining your job, it will be essential to prove to the lender that you have been living in the same region for long, and you have maintained the same address for long.
2. How Much Do You Earn?
This an inevitable question. It is one of the questions a borrower has to respond to in the best way to increase the chances of being approved for a loan. Why do we say this? Because the lenders must ascertain that you are capable of dealing with payments without struggling. The best way of doing this is ensuring that you have regular and sufficient income. A steady income is vital since the lender can ascertain that you can make payments towards the loan each month. Without proof of income, you can hardly be approved for a mortgage. In case you are self-employed, most of the questions asked are likely to be more in-depth. Extra documentation may be necessary to verify the stability of your income.
3. How Much Debt Do You Owe?
Your debt level is very critical in the loan application process. This is because it plays a significant role in the borrowers’ financial stability. In case you have a lot of obligations, it might be very hard to be approved for another credit, especially a mortgage. This is because you are likely to struggle with payments. Well, we are not saying debt is poisonous to your loan application, but much depends on the nature of the debt and the amount you owe. At all times, your debt payments should not exceed 36% of your pre-tax earnings. In case you want a mortgage, it is imperative to shun large purchases that might necessitate additional cash outlay, such as an auto. Apart from shaking your credit, such purchases might put you into additional debt.
4. Why Do You Want the Loan?
The purpose of the loan is also essential. It would help if you convinced the lender that the funds would be used most appropriately. You cannot borrow money for illegal use. The reason you state for taking the loan must be convincing.
5. How Much Do You Want?
This might look obvious. But do you know that the obvious questions often turn out to be the most difficult to respond to? This is a very critical question because there are a lot of uncertainties in lending money. There is a difference between what you want and what you need. While the question may be on what you want, you should focus your response on the much you need. The lender has to be convinced that you are borrowing only what you need, nothing more nothing less.
The Bottom Line
You must be prepared to answer questions from lenders in case you want to borrow money. In this blog, we have discussed at least five questions ton expect from lenders. You need to respond to these questions objectively to increase the chances of being approved. Remember, it is vital to also for you to evaluate lenders before deciding who to deal with. What factors should you consider when you want to borrow money? Get the answer in the next blog. Thank you?