3 Things That Can Help You Secure Financing

Various types of finance help consumers close deals – both large and small. At one end of the spectrum, credit cards and revolving accounts simplify purchases at the point of sale, facilitating day to day buys. Near the other end of the lending continuum, long-term mortgages stretch-out for decades, funding major purchases, such as houses, commercial buildings, and other structures.

Some forms of financing are rarely used – perhaps a few times during a lifetime, while other funding is commonplace in everyday life, as shoppers reach for plastic to pay for goods and services. Though the sources and uses for consumer financing are widespread, all credit relationships are based upon similar principles. In each case, borrowers make repayment assurances and a lender gives thumbs up or thumbs down, relative to an applicant’s creditworthiness. In many ways, following through with timely repayment is your most important mission when opening credit, but it’s moot if you don’t get approved. These three things can help you get the loan you need.

Steady Employment

Gainful employment is essential for loan approval. A steady earning history makes lenders confident that you’ll pay them back. Without a consistent income, banks and building societies are naturally unsure how you’ll repay a loan, so they are likely to pass over your application. If you are self-employed and applying for a loan, be prepared to document your earnings, or run the risk of missing out.

Mortgage lenders are sure to request employment and earnings information, but home loans aren’t the only financing requiring verified employment. Short-term payday loans are among the most flexible forms of fast cash, but as the name implies, eligibility is contingent upon your pending pay date and pledge to return with your paycheck for repayment.

Strong Credit Rating

From your earliest banking relationships onward, credit reporting agencies closely monitor your consumer behaviour. You can’t overcome this financial system, so you might as well use it to your advantage. Just as credit missteps can set you back, good financial behaviour helps you build strong credit references. Each timely payment and loan satisfaction reinforces your credit strength, so the longer you go without negative reports, the greater chance you have of securing funding.

A positive credit history opens doors with lenders, who consult reports from major credit agencies to assess your history handling money and meeting repayment obligations. A strong credit score can help you qualify for lower interest rates and gain access to the best types of loans for your spending needs. Applying with a low score, on the other hand, sets you apart as a lending risk, so banks and building societies will charge you a premium for access to credit.

One easy-to-remember strategy for reinforcing your credit score is known as the “30 per cent rule.” According to this recommendation, endorsed by analysts familiar with the credit rating system, you shouldn’t use all the credit that’s available to you. Instead, limit your spending to around 30 per cent of the available credit that’s open at any given time, showing credit reporting agencies that you are responsible with money.

Healthy Debt to Asset Ratio

Global debt recently reached unprecedented levels. Although much of what’s owed can be attributed to commercial and public sector lending, individual households also carry a substantial share of the burden. Much like governments or companies borrowing money, individuals must also maintain healthy balance sheets. Your debt to asset ratio represents the relationship between money you owe and the value of your assets. Financial institutions evaluate this figure before extending credit, because a high debt to asset ratio could strain your ability to meet monthly repayment obligations.

Putting your best foot forward can help you get approved for financing. To increase your chances of securing funds, show prospective lenders you are financially capable by maintaining a manageable level of household debt and a good credit score. Add a steady salary and banks, credit companies, and building societies should be eager to accommodate your funding needs.

Paul graduated in 2001 with a degree in Finance. Since then he has gone on to work for several of the UK's most well-known financial institutions.

An avid blogger and a huge football fan, Paul is here to guide you through the ins and outs of personal finance and perhaps save you some money in the process!

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