Arizona Tribune - Common Myths About How Much Loan You Can Qualify For

While it's true that not everybody can qualify for the same loan amount, you may be able to get more financing than you think. There are a number of pervasive myths about lending that can keep people from pursuing financing to meet their goals, whether they want to get an education, buy a car, or start a business. Here, we debunk some of the most common myths related to loans.

Personal loans are only for employed people

Although you do need to show an ability to repay the loan, being employed is not an absolute requirement. For instance, if you were temporarily laid off or just recently lost a job, you may still be able to qualify for a loan. Moreover, if you apply with an employed co-signer or have income from a pension or court settlement, you may increase your chances of being approved without a job.

You're guaranteed the amount you pre-qualified for

Whether you're considering buying a home or getting a personal loan to start a business, it's always a good idea to do some research to see how much money you could potentially borrow. Many lenders offer pre-qualification, which serves as a measurement for how much you could likely borrow before you formally apply.

However, pre-qualification is not the same as pre-approval. A pre-qualification is when a lender looks at your assets and credit report to make a reasonable guess at an amount you may be approved for. A pre-approval, on the other hand, digs further into your financial situation to provide a more specific number. Even a pre-approval is subject to change during the formal application process, so it's important to realize that this is truly just a ballpark figure. Sometimes, you might actually qualify for more funding than you expected.

It's also important to note that even after pre-approval, lenders could still check your credit before a loan closes. Any additional credit will be counted in your debt-to-income (DTI) ratio and could nullify your pre-approval. You should avoid opening new credit accounts or borrowing additional money while you're waiting for a loan to close.

Getting approved for a personal loan takes a long time

In reality, personal loans can be funded very quickly. While traditional lenders like banks and credit unions may take a couple of weeks to fulfill loan applications, online lenders may take as little as one business day. (However, the trade-off is usually higher interest rates or less favorable loan terms.)

You need an excellent credit score to get a loan

While it's true that a better credit score often translates to a better interest rate, you don't need outstanding credit to qualify. It's still a good idea to check your credit score before applying to have an idea of what lenders and loan products you may be eligible for.

You need collateral for a personal loan

Personal loans may be either secured or unsecured. Secured loans do require collateral, but they're not the only personal loans available. Most, in fact, are unsecured, meaning they do not require collateral. Unsecured loans tend to have higher interest rates, but most lenders determine terms based on your income level, credit history, and credit score rather than the availability of collateral.

All lenders and loan products are the same

Today's loan marketplace is incredibly competitive, with traditional lenders and alternative lenders both available to consumers. That choice can be valuable for borrowers since you can compare lenders and loan products to get a better idea of the best funding solution for you. So much choice can be overwhelming, which is why it's important to take your time to compare interest rates, loan terms, and customer experiences when exploring your loan options.

Disclaimer: This content is sponsored by myFICO and is provided for informational purposes only. The information shared here is not intended to serve as financial, legal, or credit-related advice. Readers are encouraged to consult with their personal financial advisors or credit professionals to assess their specific situation. To learn more about myFICO's services, including credit scores and monitoring tools, please visit the myFICO website or reach out to a myFICO representative.

CONTACT:
Sonakshi Murze
Manager
[email protected]

SOURCE: iQuanti

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