What Basic requirements are needed to take a loan?

Question

What qualifies?

Answer 1

A bank decides who and who doesn't qualify for a loan based on three things. 1)credit score/credit history. How long you have had credit, and what your credit score is is very important. The higher your score the better. 2)Debt/Income Ratio. Debt to Income Ratio is the percentage of money that you make that is garuenteed to go towards debts. Ex-You make $2,000 a month, and you have $500 monthly in bills. Your Debt/Income Ratio would be 25%, because you spend 1/4 of your money on bills. The higher your debt/income ratio is the higher risk you are for the bank, the lower your debt/income ratio the less risk. 25% Debt/income ratio would be really good. 50% would be bad. 3) The third and final factor of getting a loan is how much money your borrowing compaired with the worth of what your borrowing the money for. Ex- You buy a car worth $10,000, and you only borrow $5,000 because you already had half of the price. The bank would much rather loan you $5,000 for a car worth $10,000 than $5,000 for a car worth $5,000. It's less risk.

So the bank takes these three ratios and decides how high or low of a risk you are. The lower risk you are, the more likely you are to get a loan, and the interest is lower because you are more likely to pay as agreed upon. If you are higher risk you might not get a loan, if you do get a loan you will pay more interest, because the bank isn't sure they will get all the money that was promised, so the make more profit for taking that chance.

Answer 2

Jess,
You must be able to demonstrate convincingly that you can pay it back. This is really the only requirement. Everything else is secondary.

Good Luck.