Actually, closing a loan can be difficult. Lending companies expect a business plan, financial forecasts to justify the loan amount, and even your home as collateral. The prepared lending companies, however, knows the 5 secrets to winning the respect of the lending companies, and the loan you need.
These 5 lending secrets make borrowing easier and will give you an edge when negotiating with any lender: the kind of edge that can save you thousands in the long run. Here’s what you should know to keep your edge when negotiating with lending companies:
Jumping Through Hoops Guarantees Nothing
One component that a lending companies may not be entirely up-front about is the duration of their approval procedures. Many lending companies will look at a number of qualifications, including your business’s credit history, collateral and the size of your business, among other factors. They will likely request to see your personal and business financial statements, business plan and potentially cash flow forecasts for a certain length of time. All lending companies are different and may require more stipulations in addition to the ones mentioned.
After jumping through all of these hoops, there is still no guarantee that you will be approved for a business loan from these lending companies. This means that after dedicating weeks or even months to the application process, you could still find yourself without additional working capital. In comparison, most alternative lenders will be able to ensure that you receive an approval status within a week or less.
Shop Around Your Mortgage Rates
When you approach lending companies to request a mortgage refinance, you may receive an instant quote for a new interest rate. Ask the lending company questions and shop around for loan rates at other institutions, discuss how paying points or alternate loan products so you can compare rates and perhaps find a better deal. Within three business days of applying for a loan, the lending companies must give you a good faith estimate. Make sure you take that estimate and check out programs with other lending companies.
Fast Approval Might Mean No Approval
Sometimes your application might be declined by a “robot” without human ever setting eyes on it. This is often more prevalent with online lenders, because it’s one of the ways they can offer fast approval, sometimes within the hour.
Lending companies often use their own algorithms to check loan applications, automatically sorting the low-risk applications from the high-risk applications to preapprove strong applicants. It can be a way of weeding out prospective borrowers who don’t meet the initial eligibility criteria. If you’re considering applying with lending companies that offers preapproval, it’s often worth reviewing their eligibility requirements to avoid wasting time and on applications that go nowhere.
The Bigger the Loan, the Better
Believe it or not, but many lending companies don’t prefer to give out loans in smaller amounts. They don’t find these transactions to be worth their time and would prefer to lend larger sums. This means of you need a bridge loan to get you through upcoming projects or simply don’t need a large amount, you may be out of luck.
Age isn’t Everything – But It’s Something
Lending companies might find themselves in hot water if they were to deny a loan application based on age alone. This would be a clear case of age discrimination. However, your life stage can often play a part in whether you are approved or not.
At the end of the day, lending companies are primarily interested in the risks of being repaid in full.
Lending companies look for indications of financial reliability such as income, debit, and your credit score.