Getting a bank loan can be challenging, but it's not impossible. Instead of paying astronomical fees and rates to payday lenders, these tips for how to get a bank loan can help you save money. Banks and credit unions typically offer consumers unsecured personal loans and secured loans. A secured loan requires collateral such as a vehicle or real property. Unsecured loans generally carry higher interest rates because they don't require collateral; the lender has no recourse if you fail to make payments.
Before You Apply for a Bank Loan
- Be prepared. The first thing you'll want to do is check your credit score. While bank lending requirements vary, reviewing your credit scores and reports in advance can help you prepare for questions bank loan officers may have, such as why your accounts were past due two years ago or why you've had a few late payments on your car loan. According to federal law, you can request one free copy of each of your credit reports annually. Review your credit reports for errors or signs of identity theft. The Federal Trade Commission advises that correcting errors takes time but is worthwhile if errors or fraudulent activity on your accounts has lowered your credit scores.
- Shop local and online banks. Request loan quotes from your bank or credit union and compare them to quotes you request online. Online lenders offer personal loans at competitive rates. Comparing several loan quotes expands your options and can help you find your top two or three lenders.
- Open more than one type of account with a bank. If you already have a checking or savings account, apply for a loan with your existing bank. If not, consider opening an account and applying for a loan. If your credit is compromised, you may be able to use your savings as collateral for a personal loan.
How to Get a Bank Loan: Application Process
Have supporting documentation ready before you complete your application. This will streamline the application process and help with avoiding errors. Bank statements, account numbers, pay stubs, employer information and employment dates are examples of information you'll need to provide.
- Check your application and check it again. When applying for a bank loan, ensure that you've provided all information requested, along with backup documents if needed. Missing information can be a red flag to lenders, especially if it's connected to your credit history or income. When applying for a bank loan, too much information is OK, but not enough inforomation can ruin your chances for approval.
- Don't be discouraged. Bank lending policies vary. If your bank loan application is denied, apply to another lender. Online loan quotes provide contacts to multiple lenders with varying loan requirements.
If your loan application is declined because you have too much debt and you're wondering how to get approved for a bank loan, the National Foundation for Credit Counseling recommends paying down credit card debt or addressing debt issues through a certified credit counseling agency. It may be necessary to reduce debt before you can successfully apply for a bank loan.