Borrowing money is something that almost every adult has to do at some point in life. But just because everybody needs to do it doesn’t mean that everybody gets the same options or outcome. It’s important to understand how lending works, especially in the modern era, in order to set yourself up for success. Here are some examples of how to do just that.
First things first, though. Let’s talk about what you should do if you need money now, but haven’t had a year to improve your personal finances and credit. In this case, your options are more limited but this does not mean that you won’t be able to get a loan. Equity loans, Title loans in Wilmington, dealer financing, Peer-to-peer lending – there are many options available to you. Research these options individually and look at what is locally, regionally, nationally, and internationally available to you. You should have no trouble getting a loan.
If you do have time to clean up your personal finance act, though, here are some of the best ways to do it.
Pay Off Debt. High debt is one of the most fundamental reasons why a person might be denied a loan from a conventional lender. Debt-to-income ratio is a metric by which a lender can understand how likely it is for a borrower to pay a loan back in full and on time. If you can’t even afford to pay back the debt you already have (at least not very quickly), then a lender may pass you by. Spend some time paying off debt, then try for the loan.
Optimize Your Credit Cards. If you have many credit cards, maybe it’s time to close some accounts. In general a person should have no more than five or ten credit cards, unless you are a master of credit card management. Never cancel the first card you ever opened, because this marks the start of your credit history (long history = better). Make sure not to use more than 30% of the credit limit of any one card. If at all possible, pay down the balances of each card every single month.
Investigate Your Credit Report. Credit scores are created on the basis of the contents of your credit report. Your credit report is a history of all of the major credit behaviors you’ve done over the years. When you don’t pay a bill or request too much credit in a short period of time, this creates a negative mark on your reports, which then lowers your credit score. You can dispute items, which will sometimes make them disappear. Or you can pay them off and then dispute, in which case they’ll definitely disappear. Don’t “poke the bear” by disputing legitimate debts that you can’t actually afford to repay.
With these methods you should be able to make yourself less financially vulnerable, as well as more able to receive a loan from a variety of lenders. Good luck with this; stick with it. It will make a difference in your life for many years to come.