Small Business Finance Articles

Knowing the process of your loan application can save you lots of heartache and money

When you submit your loan application the banks credit officer look at it. If you know what they are looking, for can increase your chances of being approved at the lowest rate so much easier.  Here the issue of loan shoppers and your existing loan payment pattern of debt are discussed.

Recognise that banks can also say NO. Two issues that banks look at for deciding  your risk profile and that determines if you will get a loan or not and at what rate.  Shoppers and missed or late payment fees are discussed here.

 

Shopping

 

For an average householder who wants to get a loan. They go into a number of banks and non bank lenders to fill out applications and talk to people, looking for the best deal.  They don’t really want a loan at this stage, they are just shopping.  After a while they get the picture of what is available and who has the best rate etc and that’s when they become serious.

 

They complete the loan application and submit it.  The first thing the bank does is do a credit check.  They find that you have been shopping around.  Each application and serious enquiry for mortgage, credit cards, personal loans etc are all listed on your credit report.   You can be tracked on your hunt for the best deal.

 

Lenders do not like this.  The attitude is that you will always be a shopper and this makes the bank nervous that thy  wont  have stability with you.  Here today, gone tomorrow.   banks take a couple of years before a loan is really profitable. A shopper is a threat to the bank The bank recognises that  the  applicant  who is looking in the short term  for an other opportunity and changes to another loan is a risk since the bank would lose money on this applicant. The bank’s attitude is if they can clearly identify a shopper why write the loan.

 

Some people say I can do it just as good analysis as a Mortgage Broker.  That may be true but you mess up your credit rating in the process.  Counter productive.

 

It is not uncommon  after an application has been through the credit department in the approval process to send out the following question to the potential borrower.   Can we have an explanation as to why they have been to Bank A, Bank B, Bank C, Bank D  Bank E?   To say the borrow does not get a shock is an understatement.

  

How to avoid this.

 

Go to a Mortgage Broker.  They have access to many banks and lending institutions.  They know all the deals and where to obtain the best deals for you.

 

So once you have chosen your loan you make an application.  You are not seen as a shopper.

 

Payment Pattern

 

When you make an application for a loan you are generally asked to submit your: