Mark Hauser is a financial expert who wants you to know what you are signing up for when you apply for a loan. He details how consumer loans work and highlights the seven criteria lenders consider when evaluating your application.
- The application credit score
Mark Hauser explains the concept of credit scores; lenders consider more than one type of credit score.
- Employment history and income
Having a stable and well-paying job history is important to get accepted for a loan. Ask your current employer about a pay stub for your credit application. Even if you have a job now but haven’t worked there long enough to get a salary history, ask your employer to write a letter stating how long you have been employed and what they can vouch for regarding your work ethic and ability.
- Debt-to-income ratio
Mark Hauser mentions that your income is only one of the factors to consider when calculating your debt-to-income ratio. Lenders will also consider your credit card balances, mortgage balance, and other types of debt.
- Available Liquid Assets
People with assets to cover their debt obligations, such as a 401(k), can be approved for loans without any problem. You may also ask your employer to verify the amount of your pension or other savings.
- Value of the loan collateral
If you are applying for a loan to consolidate your credit card debt, the lender may ask you to provide a list of all your debts, interest rates, and balances. You may be asked to sign over the deed of the house you live in or an insurance policy.
- Amount of the down payment
The more money you can put as a down payment upfront, the more chances your loan application will be approved.
- Term of the loan
Longer terms with low-interest rates may seem tempting. However, you will have to pay a lot more in interest over the life of your loan. 3- and 4-year loans are great for consolidating your credit card payments and paying off your debt faster.