Things to Keep in Mind before Seeking a Personal Loan from a Bank

It’s not unusual these days for most people to live pay cheque to pay cheque. Very few of us have money saved away in the bank because so much of our money goes into paying down personal debts. If you’re looking for a little cash to go out and buy a new dining room set, or a new TV, you may want to consider approaching your bank for a personal loan. This may be easier if you’re a homeowner, or if you have other significant equity elsewhere, but it’s not impossible if you don’t. Before you approach a bank for a personal loan there are a few things that you should do first.

Obtain a Copy of your Credit Rating

Before you go to the bank you should get a hold of Equifax, or whatever the major credit bureau is in your jurisdiction, and obtain a copy of your credit report. You might think there’s nothing on there to worry about, but it’s not unusual for consumers to find surprises on their credit report they weren’t expecting. Sometimes there’s a debt from a couple of years ago, often a trivial amount, which you forgot all about that will show up on your report. In rare cases, there may even be something on there that doesn’t belong at all. It’s best to get that cleared up before approaching your bank for a loan.

Clear up Outstanding Debt

In most cases you’ll know exactly what you’re likely to find on your credit rating. Be proactive. If you know there’s a delinquent debt against you, no matter how small the amount pay it off, or at least make arrangements to do so. Why would a bank lend money to you if you can’t even pay off the debts you have? Once you’ve paid the debt or made arrangements to do so, make sure you obtain documentation that you can present to the bank if you’re questioned about it. Banks don’t necessarily expect you to be perfect, but they do expect you to be responsible.

Know why you want The Loan

A bank won’t just hand you money unless you can tell them why you want it. It should be for a valid reason as well, they’re not likely to give you a $5000 loan so that you can go on a pub crawl. If you want the money to pay off bills, they may be willing to grant you the money, but they may want to pay the bills directly for you. If you’re looking for money to upgrade your furniture because it’s getting a little ratty, only ask for as much as you really need. Remember, you still have to pay the loan back. In general, if you don’t have anything to secure it against a bank is not likely to grant you a loan of more than $5000.

Conclusion

Obtaining a small loan from a bank can be fairly straightforward if you’re credit rating’s good and your debt to asset ratio is solid. The main thing is to make sure you go into the loan meeting with a good understanding of your own credit history, and with a good understanding of what you want the loan for. If you keep these things in mind you should have a pretty good chance of getting the loan.

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