When you don’t have the money to pay for the items you need, a loan can assist, but getting a loan can be difficult. If you begin the bank loan application procedure without knowing all the details, your loan request can be denied. Find out beforehand what to anticipate and what you can do to improve your chances of being accepted.

Understanding Your Credit

In general, credit history is required to obtain a bank loan. Additionally, the kind of loan you receive and the terms of that loan will frequently depend on your credit. This means that to be approved for a loan, you must have a history of borrowing and repaying debt. If you don’t have credit, how can you acquire a loan when you need money?

Starting small usually entails taking out larger loans with greater interest rates. You can also take into account other lenders, such as online lenders, who are frequently prepared to evaluate factors other than your credit when determining whether to issue you a loan. Lenders will lend to you more often and at cheaper interest rates once you establish a solid credit history.

You can examine your credit report for free; Experian, TransUnion, and Equifax each provide you with one free report each year. To discover what creditors will notice if you apply for a loan, review your credit history. It will typically be more difficult to obtain a loan if there isn’t much in there because lenders won’t be able to determine your risk as a borrower. This indicates that you might need to gradually add loans to your past to establish credit before applying for a loan.

Make sure to correct any errors in your credit reports as they make you appear to lenders to be a riskier borrower and reduce your chances of obtaining a suitable loan.

Decide on a Bank Loan Amount

You must eventually return the borrowed funds to a bank or other lender along with interest; keep in mind that loans are not free money. Your credit score could be negatively impacted if you don’t make loan payments on time. 2 Determining the appropriate borrowing quantity is crucial for this reason.

Based on what you intend to do with the money, take into account the amount you require. However, you should also consider your regular loan payments and if you can make them on time with the loan payback plan, whether it be monthly or quarterly.

Before deciding on a loan amount, it is a good idea to perform some preliminary loan calculations. This enables you to calculate the cost of a loan of a particular amount and determine whether an alternative loan amount (or loan duration, or interest rate) might result in a lower cost to you. To calculate loans, there are many internet tools available. Naturally, lending rates and lender conditions could cause your final loan installments to vary slightly.

Determine the Type of Bank Loan You Need 

Next, determine the kind of bank loan you require. What you intend to accomplish with the money will determine the type of loan you receive. Several prevalent loan kinds include:

  • Auto loans for buying a vehicle
  • Home loans (mortgage loans), including second mortgages for buying a home or borrowing against the equity in your home
  • Student loans for educational purposes
  • Personal loans, which can be used for almost any purpose
  • Business loans for starting or expanding your business
  • Fast loans, which can provide quick cash for emergencies.


Some lenders might permit you to take out a specific loan type even when it does not fit your needs. For instance, you can typically get a personal loan to cover medical costs, house repairs, or other costs. However, certain restrictions apply to other loan kinds. For instance, you typically need a mortgage loan to purchase a property. Additionally, not all loan kinds may be available to you. For instance, you often need to show documentation of attendance in a degree program to be approved for a student loan.

Note: You should choose a loan type that fits your financial needs because credit scoring algorithms are frequently tailored for specific lenders and loan types.

Decide Where to Borrow Money

Look around for a lender once you have a general understanding of your credit, loan type, and loan amount. You can compare different lenders using The Balance’s lists of the top mortgage lenders and personal loan providers.

Once more, the type of loan you desire may influence the lender you select. Some organizations don’t provide student loans or business loans. Start your search at the businesses that have a reputation for offering loans of the desired type at competitive rates. For instance, before going to the bank for a private student loan, go through the Student Aid office at your school for an education loan.

For the majority of loans, banks and credit unions are good options. Compare the fees and interest rates offered by different institutions. You should also include peer-to-peer loans and other marketplace lending options on your list. Another choice is to use online lenders, but if you do so, only do so on trustworthy websites.

Some people obtain financial assistance from private lenders, including friends and relatives. That can ease approval and keep expenses down, but it can also lead to issues. Money can wreck relationships, even if the cash amounts are little, so make sure you put everything in writing so everyone is on the same page.

Avoid high-cost loans and unscrupulous lenders that frequently trick borrowers into taking out loans they are ineligible for or cannot afford. When you’ve been denied numerous times and are unsure of how else to obtain a loan for the money you require, it can be tempting to take whatever you can get. They will lend you money, but you will get yourself into a situation from which it will be difficult or impossible to recover.

The most expensive options are typically payday loans, which are short-term loans with hefty interest rates. Loan sharks can also be extremely dangerous since they set strict deadlines for loan repayment.


Payroll advances from your company and Payday Alternative Loans (PALS), which let you borrow small amounts from credit unions, are two other rapid lending options that can provide you with money quickly without the triple-digit APRs of payday loans. Dealing with these lenders may be safer than doing so with traditional payday lenders.

Understand the Loan

Examine the terms of the loan before obtaining one from a bank. Do you plan to pay it back every month or all at once? How much does interest cost? Has the lender mandated a specific method of repayment, such as electronic bank account payments? Before you borrow money, be sure you know what you’re getting into and how things will operate. To budget for the loan and see how it will be repaid over time, it’s also a good idea to enter the loan conditions into a loan calculator once again and view an amortization table (whether you create it yourself or allow a machine to do it for you).

Get a loan you can afford—one that you can return without too much difficulty and that won’t prohibit you from carrying out other necessary tasks (like saving for retirement or having a little fun). Determine your debt-to-income ratio (what lenders refer to as your “debt-to-income ratio”) and, if you don’t like what you see, borrow less money. Most lenders prefer to see a ratio of around 36% or less.

Apply for the Loan

You’re ready to get your bank loan once you’ve:

  • Spruced up your credit
  • Settled on a loan amount
  • Picked the best type of loan
  • Shopped the competition
  • Run the numbers

You can now visit your preferred lender and apply. Starting the loan application process is simple: Simply explain to the lender why you need to borrow money and how you intend to use it (if required). They will outline what comes next and how long it will take.

You must fill out an application with details about your money and yourself. You must, for instance, provide identification, present your address, social security number, or equivalent, and disclose your income details.


To increase your chances of getting a personal loan accepted, make sure you can demonstrate documentation of a steady source of income before you apply. Look for a co-signer (a family member, for example) who has a greater income and credit score than you do if your income (or credit score) is insufficient.

Go Through Underwriting

Following the submission of your bank loan application, the lender will assess your viability as a borrower. This procedure could happen right away or it might take a few weeks. For instance, because there is more at stake, home loans take longer than credit card offers. To demonstrate your ability to repay a mortgage loan, you must provide significant documents, such as bank records and pay stubs. 4 By organizing things months before you apply, you may simplify the process for yourself.

Lenders will check your credit (or just utilize your credit score) during the underwriting process and examine your application. On occasion, they might call and ask you to explain or provide evidence. Make sure to respond to these queries right away to prevent making the loan application process take longer.

Business Loans

Similar to any other type of bank loan, business loans are available. The same fundamental qualities that lenders look for in customers for personal loans also apply to those seeking business loans. However, young enterprises don’t typically have a long history of borrowing (or credit). Since startups and service companies frequently lack assets that may be used as collateral, obtaining loans might be more difficult for them.

To assess if a borrower is eligible for a business loan, lenders frequently consider their income and credit history on a personal level. They might also examine the company’s credit. 5 When applying for loans, business owners who lack good business credit may also be required to put up personal assets as security. In the beginning, this is frequently the only method to receive loans, but you should work to establish company credit so you may eventually borrow without putting your assets at risk.

If You Can’t Get a Loan

An initial bank loan approval might not be granted. Although lenders are free to reject applications for nearly any reason, they ought to be able to explain why you weren’t accepted. List of grounds for loan rejection

Negative things on a credit report include late payments, too many recent credit inquiries, and credit scores below the lender’s minimum requirements.

If your credit isn’t the problem, you may have issues with your income or debt-to-income ratio. Your income may be too low or your debt-to-income ratio may be too high

Other characteristics: Your employment history or housing instability are two more factors that lenders may take into account when deciding whether to approve you.

If you are turned down, you may need to come up with another plan, send a letter, or try to borrow money with the support of a co-signer who has excellent credit and a stable source of income. A loan denial has no negative effects on your credit report or score. 8 Therefore, if you try to fix the problems that caused the rejection and reapply, your earlier rejection won’t be used against you. On your second attempt, you very well may get accepted

Frequently Asked Questions (FAQs)

How long does it take to get a loan?

The kind of loan you’re getting, how much you need, your financial position, and the lender you pick will all affect how long it takes to get one. While the underwriting procedure for a personal loan or auto loan can be completed in a day or two, it can take a month or longer for a mortgage. Before making your purchase, getting pre-approved might hasten the process.

How much will a bank loan me?

The sort of loan, your credit and financial condition, and what you’re willing to contribute personally to secure the loan are all relevant factors. Generally speaking, having better credit, having less debt, and having more value collateral can help you get a bigger loan. The better, your collateral, the lower the loan balance.


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