Getting your first loan can be an exciting time, whether you are getting it for your first car, a holiday or even to consolidate some debt.
But this time can also be a cause of stress if you are not prepared for what is involved in applying for a loan.
Meeting the criteria
The main thing you need to do before applying for a loan is checking if you meet the criteria. Every lender has different criteria, so it is important to understand this before you send in an application.
Usually you would have to meet the below:
- Be at least 18 years old
- Live in New Zealand (or the country where you are applying for the loan)
- Be a permanent Resident (Some lenders will lend to work visa holders however)
- Be employed or have an alternative means of income (such as a WINZ benefit)
- Meet a minimum income criteria (Often around $500 a week income)
Now of course some of these criteria can be by-passed in certain situations. For example, if you do not have an appropriate weekly income, sometimes a co-borrower can be used to meet the criteria instead. But more on that later.
Applying for the right amount of money
The amount of money you want to borrow is another big factor on whether or not a lender will give you the money. Personal loans are supposed to help you out in the short term but not harm you in the long run.
If you wanted to borrow $50,000 but only earn $200 a week as a part time employee, the lender would not approve the loan as you would unlikely not be able to afford to pay it back.
A quick rule of thumb here is once you have calculated the repayments per month, if you still have at least $900 left over after all your expenses (food, rent, power etc), the lender will likely approve your loan.
Build a good credit history
You may have heard before that you need a good credit history in order to apply for a loan, but what is a good credit history and how do I get one?
An easy way to build up a credit history is to have a monthly utility bill in your name that you always pay on time. For instance you might have a phone bill for your mobile phone that you pay every month.
This shows to a potential lender, that you are reliable at paying money that you owe and gives them more confidence in lending you the money that you want to borrow.
Is no credit history a good thing? Unfortunately it doesn’t help you get a loan as now a potential lender has no way of seeing if you have been reliable at paying bills in the past.
So if you currently do not have a credit history, that is something you will need to start working on.
Have tidy bank accounts
When you apply for a loan, most times a lender will want to see your last 3 months of bank statements. This is so they can see your spending habits and your general approach to finance.
In order to help them see your good money habits, make sure you have your salary always put into the same account so it can easily be seen you are getting paid the amount you say you are.
Make sure you do not overdraw your account, this way you show you have good budgeting skills and know how to manage your finances well. This will give a lender even more confidence in your application.
Have a savings account and show a good history of putting money aside into this account. This shows your budgeting skills and that you are able to plan ahead.
Ready to get a loan?
If you think you have all the above covered, you are ready to apply for a loan. Here at Loanplace we have an expert team that can help you get the finance you want at a fantastic rate. Check out our loan repayment calculator and get started now.