How To Get The Right Loans For You


There are many different types of loans out there, and knowing which ones are the best for your specific situation can be somewhat tricky. First you should know your FICO credit score. Your credit score reflects your credit history, whether you have been delinquent on payments, how much debt you have, and even what kinds of debt (believe it or not, there are both “good” and “bad” types of debt) you have. There are several good websites out there where you can obtain a full credit report, including your credit score, for free. And once you have obtained your credit report, you should check it for accuracy. Many times people will find mistakes on their credit report which have a negative effect on their credit score.

Determine Your Net Worth

Second, you should determine your net worth. Your net worth is simply the value of all of your assets (cash, investments, car, house, etc. – what you own) minus the balances of all your debts (credit cards, student loans, car loans – what you owe). The difference represents your net worth. Borrowers with a higher net worth are of less risk to a lender because they have unencumbered assets against which the lender could potentially loan money.

Research the Types of Loans available to you

Thirdly, you should research the various types of loans available for your situation. Loan types and features will vary greatly depending on the type of borrower you are (taking into account your credit score and net worth), what you need the money for (student loans for school, a new car, medical bills, or to consolidate your credit cards into a lower interest loan), and risk tolerance (not only the lender’s risk tolerance but how much risk you are willing to take on as well). Even for some specific types of loans, such as a home mortgage loan, or a home equity loan, there are numerous types available (30 year fixed, 40 year fixed, FHA-insured loan, 7/1 adjustable rate mortgage, reverse mortgage, and so on.

Finally, you should do some research on the specific lenders to determine their credibility and reliability. How long have they been in business? What interest rates do they charge? Can you “buy down” the interest rate? Will the initial lender sell your mortgage to another (sometimes lenders will fund the loan and immediately sell it to another lender. This has happened to me a few times and the lender who ultimately services the loan is not as user-friendly as the original lender). You can even check with a credit rating agency such as the Better Business Bureau to ensure your lender is reputable. In summary, by taking the above steps (determine your credit score, determine your net worth, research the various types of loans available, and research the specific lenders), you will be sure to find just the right loan to fit your needs.

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