How to apply for credit?
Having projects is one thing, but funding them is another. Indeed, it is not always easy to get the funds necessary for their realization. This is why it can be interesting to opt for a loan, regardless of the project.
Credit application: choose the right product
In this guide, we explain how to choose the right financial product and give you the keys to make the best decision. This will make it easier for you to answer the questions “How do I apply for credit?” and “Who can make a loan?”.
The project to finance
You have a project, but financing it requires cash. The very first question to ask yourself before even considering applying for credit is what is the corresponding bank loan . It is therefore necessary to examine the project and define its nature: do you want to change your kitchen? Or have solar panels installed? If these two adjustments involve work on your premises, it will not however be the same loan. For example, in the first case, the corresponding loan is a renovation loan. In the second case, the adapted loan is a green credit, which will offer you a much more interesting interest rate. It is therefore essential to be well informed in order to determine which financial product is right for you.
In the second step, you will need to estimate the amount necessary to finance your project. If you want to make a specific purchase, be sure to request a quote to get a clear idea of the amount you need. You can also surf the web and estimate the prices on the market for the desired item. However, in the case of a loan all goals, we will not ask you to justify your expenses. This means that it is up to you to decide how much you want to borrow and how you will use it.
Inventory of your financial situation
Before even starting to look at the offers available on the market, ask yourself the following essential question: what is my repayment capacity ? Can I afford to apply for credit and cover the costs involved?
Indeed, a little later in your process, you will have to decide on how long you want to repay your bank loan. If it is not possible to estimate the budget that we will have in five or ten years, it is however important to ask the following questions:
- Do I have a project to make a big acquisition? (example: a car, a house)
- Do I still have a permanent contract? Will I change companies?
- Will I have expenses that I don’t have today? (example: arrival of children in a couple)
If you cannot answer these questions with certainty, they can still give you a more precise idea of the future state of your finances and will prevent hasty decisions.
Find the loan that suits you
Now that you have defined your project and examined your financial situation, you need to find the best financing option. No secret here, you will have to find out more about the credit offers in the country.
There are two main types of loan:
The affected loan , such as a car , work or motorcycle loan . This type of loan allows you to finance a particular good or service and you will have to attach to your credit request proof of the purchase to be made (order form or quote, for example) and send it all to your financial institution in order to to be able to release the funds.
They are different in nature and both respond to the same conditions with regard to the application process as well as its repayment conditions, which are fixed in advance in the loan contract . To find the best credits in the country, we recommend that you simulate your loan and compare the loans online on lenders.
What you need to know before applying
Important points to consider
A loan is a financial product adapted to the needs of the client. In this perspective, the duration of reimbursement of the contract plays an essential role, because it defines the rate that applies as well as the monthly payment to be reimbursed. The interest rate will strongly depend on this duration. The APR or Annual Effective Annual Rate corresponds to the interest paid on an annual basis to which are added the administrative costs relating to your loan. The higher the latter, the higher the total cost of your loan. Also, be aware that a rate above 6% is likely to create what is called bad debt .
Also read our guide: Everything you need to know about receivables
A bad debt is a debt that impoverishes you, without creating real benefits for you. In other words, it is a purchase not really necessary and costing you more than it should in the long term. This type of debt is notably the source of many cases of over-indebtedness . So think carefully before applying for credit that you may regret.
Rights and obligations
There are indeed a number of legal provisions that protect you as a borrower. These allow you to think about your options, obtain additional information, modify the duration of your repayments, or even give up your loan if the decision is necessary.
How to optimize your credit application file?
Optimizing your application file potentially increases your chances of obtaining a loan quickly.
Start collecting documents
Providing a complete file from the start is the first thing to do: it shows your organizational spirit and that you are serious in your efforts. Therefore, refer to the list of supporting documents to be provided above and collect them before going to a bank. In addition, by consulting a financial advisor, you can already present these documents to him and get an idea of the credit and its repayment terms before officially filing your loan request.
However, applying for credit should not be a decision taken on a whim. You have to think about it before you start, because you potentially commit to years in which you will have to meet your deadlines. So, 6 months before proceeding with your request, start putting your expenses in order to show that you have a good borrower profile.
For example, start setting aside, even a little, but every month. This shows that you are disciplined and reasonable, and know how to manage your recurring expenses alongside your savings. Avoid overdrafts as much as possible to show that you don’t live on credit .
Make a personal contribution
If however you do not have the best of profiles, you can wait and collect part of the necessary amount. By making a personal contribution, you guarantee yourself a lower interest rate, and show the lender that you have a good repayment capacity. This sum generally represents between 10% and 50% of the amount of the loan .
Bring a deposit
Always in the spirit of strengthening your borrowing profile, it may be well to ask a family member or a close friend to act as guarantor for you. So, in case you encounter financial difficulties, the latter can help you and pay your monthly payments .
By comparing the different credits in the country , you will have a better idea of the rates charged and the usual repayment periods. Indeed, a warned man is worth two. This will allow you to find the best credit for your profile and according to your criteria, and to be able to direct you to the appropriate financial institution. On lenders, you are directly redirected to the bank concerned and can then apply for credit online in just a few minutes!
As you will have understood, applying for credit is not a decision to be taken lightly. Be aware of your repayment possibilities and the possible development of your financial situation so that you can rebound in case of difficulties. And finally, remember that borrowing money also costs money and that you agree not only to repay the amount borrowed, but also to pay interest .