When looking to borrow money, you certainly don’t want to be turned down for a loan. If a lender has rejected your application in the past, or if you have never applied for an installment loan, you may be wondering what you can do to find out if you qualify, before you apply. We asked our partners at Fairstone Financial for four tips to help you know if you are eligible for a loan before setting foot in a financial institution. Here is what they explained to us:
1 – Check your credit score
Today, it’s pretty easy to check your credit report yourself. You can access it through a third-party provider, or contact one of Canada’s two credit bureaus – Equifax and TransUnion – to get a copy of your credit report. To get the most accurate results, it’s best to go straight to the source. By knowing your current credit rating, your debts or unpaid bills, and your general credit condition, you will be able to know which financial institutions are more likely to grant you a loan. The higher your credit rating, and the less debt you have, the more likely you are to qualify.
2 – determine from which institution you should apply for a loan
There are many different types of lenders, and each of them serves a different range of credit scores. When you know your credit rating, it’s easier to know what type of lender might be able to give you a loan.
- Banks are the most conformist of lenders, and typically only grant loans to people with very good to excellent credit scores (at least 720 out of 900).
- Credit unions are slightly more tolerant than banks, but remain very cautious. Those with a rating in the higher portion of the “good” category, or with ratings ranging from very good to excellent, may be eligible for a credit union loan.
- A lender like Fairstone Financial serves customers with fair to good credit scores, as well as those who may have been turned down by banks and credit unions because of their current debt levels. There are middleman lenders (which sit between banks and payday lenders) who serve customers with a credit score below 700. These lenders apply varying eligibility criteria, and interest rates and terms. they offer reflect the higher risk they take on by lending to customers with lower credit.
- Many payday or private lenders also offer loan products. These loans carry the highest interest rates and usually the shortest terms, since they are granted to high-risk borrowers. If you are considering doing business with a payday lender, or are currently in the process of paying off a payday loan, we recommend that you attempt to obtain a loan from an intermediary lender. You could consolidate your unpaid debts and get off to a good start with a loan that has a lower interest rate and a longer repayment term than those that come with payday loans.
3 – try a loan calculator
After you have thought about which type of lender is right for you, you should now consider whether the lender in question offers a loan estimator or calculator tool. This generic tool allows you to find out for yourself what types of loans are available, without having to provide a large amount of personal information. A loan calculator will give you an idea of how much money you could borrow, but the result will not be personalized to your current financial situation.
4 – Ask the lender to offer you a personalized estimate that will not hurt your credit rating
After you’ve tried the generic tools available on the lender’s website and learned more about the loan products on offer, it’s time to see if the lender can offer you a personalized loan estimate. Ideally, the lender should be able to use only some of your information to produce an estimate that reflects your current financial condition, without requiring a recorded credit check. Remember that every time a lender performs a recorded credit check, it is reported to a credit reporting agency. If too many credit checks are done in a short period of time, your credit rating will suffer.
Interested in getting a loan estimate from an intermediary lender? If you want to know how much money you could borrow without hurting your credit rating, request an instant, no-obligation loan estimate from Finacial Agent.
It can be scary not knowing if you will qualify for a loan, but by doing your research and asking the lender for a no-obligation estimate, you will have full control of your situation. Whether you need a loan to cover urgent expenses, consolidate debt, or just want to clear your budget, there is a lender that’s right for your current financial situation.