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So you have
applied and you get a response. When you apply
for any loan, be sure to thoroughly complete the
application. Some companies, in addition to
reviewing your credit, will assign you an
internal application score.
You get this score by getting, or losing
“points” based on information you listed on your
application. If you are asked for a bank
reference but didn’t bring that information with
you, get that information, then submit your
application. Do not submit with missing
information. You may very well lose “points”
which could be the difference between an
approval and a decline.
Let’s say you are well off and you have a Money
Market Account, Certificate of Deposit, or even
an IRA with a good balance, ask a Loan Officer
if providing that information will help the
application. Sometimes it will. Basically,
companies are trying to see if you have not only
the willingness to repay based on your report,
but the capacity to repay based on your assets.
Capacity is assessed by your cash flow, back up
cash and assets. If you can show that you have a
large back up, some companies will consider
this. Willingness to repay is mostly determined
by your credit bureau. Any slow pays may have
been out of your control, but they will be taken
as is.
Additional Information
Once you have
applied, if you are contacted for additional
information, supply as much requested as
possible.
You may not have supplied enough information and
your application may be at a standstill until
this is provided. Sometimes, your application is
“declined as is” but it is a borderline case and
the loan officer wants to get something from you
to strengthen your application, which may make
an approval out of it.
Approved.
You have been
approved. If you wanted more than what you got,
ask for more. Very often, the amount you
received is not the maximum and sometimes, you
can get a 10% to 15% increase without another
credit review automatically, just by asking!
Individual Guarantee Most Loans require what is
often referred to as an individual Guarantor or
signer. Sometimes the institution says that you
are required to “sign on it”. This means more
than you are just signing to acknowledge or
agree to the terms. It means that you are
legally agreeing to personally guarantee the
loan, which gives the institution the right to
sue you for payment in the event you cannot pay.
This could include their ability to garnish your
wages, place liens on your home, etc. What the
company can do will vary from contract to
contract, but it gives them great power over
you. Most of the time you have no choice but to
sign, otherwise the loan would not have been
approved. You should simply be aware of this and
be prepared that severe negative consequences to
you are real and can easily take place if you
default or are severely delinquent.
Co-Signers
If you are
co-signing to “help” someone else get a loan,
you are just as responsible for that loan as the
person you are helping get the loan for. Many
people get derogatory items reporting on their
credit report on loans they co-signed on
because.
After they co-signed on the loan, they
considered themselves to be done with the
transaction and they forget about it. They also
don’t keep track of how the person they
co-signed for is paying on the loan. Most
companies don’t send the co-signer notices of
when the payments are due or notices that the
payments are late. It isn’t until the loan is
severely delinquent or in default status that
the co-signer is contacted for payment. By then
it has negatively affected your credit in a
major way and it is too late.
If you co-sign any personal loans or business
loans for anyone, make sure you feel they will
really repay. Keep track of the loan and have
the lender send you notices of payments due and
immediately notify you or contact you if the
payments are delinquent. Most importantly, be
prepared, as you promised with your signature,
to pay in the event the primary borrower
doesn’t.
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