A loan is never approved by banks or private credit providers on demand and without a loan application complete with all the required information. The banker and borrower makes an application that grants lenders or refuses. The credit applicant should be clear about one thing: it reveals a lot of data and exposes its entire financial situation. Therefore, it is advisable to consider how good the chances of obtaining a loan are before applying. Many people today have financial problems. Banks therefore critically review any loan application, including offline loans and online loans. A small error in the application can be enough to make the credit decision negative.
Which types of credit are available?
The credit market offers different types of loans. First, a distinction is made between a corporate loan and a personal loan. For corporate loans granted to companies and the self-employed, the banks distinguish whether it is a loan with short or long maturities. If you have a short-term borrowing needs, you can use the working capital loan of your business account. This working capital loan corresponds on the business account to the disposition credit, which can be granted on a private account. A loan that is requested through a loan application may be cheaper. For long-term purchases such as machinery (capital goods) or vehicles, banks provide specially designed corporate loans. Private bank customers also have the option of applying for a loan. This is particularly recommended if the repayment credit is too expensive, because a short-term compensation is not possible. For private customers, there are two types of loan, the earmarked loan or the freely available credit.
Loans can be divided into installment loans and overdraft facilities as well as freely usable and earmarked loans.
Assigned loan or freely available credit
Assigned consumer loans are widespread and better seen by banks than freely available loans. In the case of a special purpose loan, the purpose simultaneously fulfills the security claim. Prime examples of the earmarked loan are real estate and vehicle financing.
Prerequisites for the loan approval and duration from the loan application to the payment of the loan
Those who deal intensively with the application have the best chance of obtaining a loan. First and foremost, the banks are interested in the creditworthiness of the credit customer as well as income and collateral. [Sufficient income in relation to the amount of credit plays a crucial role in lending. The amount of the loan must be in realistic proportion to the disposable income. Anyone who has only $ 1,000.00 of income and applies for a loan in an unrealistic amount of $ 20,000.00, for which the loan approval is likely to be difficult. A borrower should assess his or her situation realistically and provide correct information.
Creditworthy by collateral
Individuals often forget to state additional salaries such as Christmas bonus, holiday pay or annual bonuses in the loan application. In addition, banks welcome lower-income credit applicants who have long-term ancillary income. Even a savings account or other investment – ideally at the lending bank – are rated as security positive. In the application form, if the additional income fields are missing, it is recommended to add the total annual income from all sources of income and divide it by 12 months as in most cases the monthly income is requested in the application form. If the borrower already has other obligations in the form of loans, the lender assesses the overall situation. Especially with higher loan amounts it can be helpful to involve a guarantor.
For couples and spouses, this is often the partner. Banks also give a positive rating if the borrower offers these collateral on his own. Self-employed persons engaged in self-employment or freelance work are scrutinized by banks before lending, unless they have above-average revenues. Lending is also problematic if the job was changed shortly before the application was submitted. Many banks will advise waiting for the probationary period. Again, high security or a guarantor can be the solution. However, it should be remembered that the borrower imposes a high responsibility on the guarantor in the event of insolvency. Many banks offer credit customers a residual debt insurance. This is to step in if the customer can not service the loan. It is up to everyone to take out the expensive insurance. If the credit rating is not perfect, the residual debt insurance could be a criterion for the loan approval.
How much time does the bank need from application to disbursement of the loan
Assuming that the loan application is approved, the duration until disbursement depends decidedly on the involvement of the borrower. Anyone who knows in advance exactly what information is needed avoids frequent inquiries from the lender and thus shortens the time until payment. In addition, it is a fallacy that online loans are paid out faster than bank loans. Anyone who has been bank customers for some time, has made a positive impression on their house bank, has the best chance of getting the loan paid out immediately or within a few days if they personally approach their bank adviser and provide all documents and collateral on their own. Overall, the time from credit application to payment is between a few days to two weeks.
Apply for Loan Online – the difference to personal bank loan
Many banks and private lenders promise the fast online loan and lure the loan customer with immediate cash payment. This leads to a misconception among borrowers that they are not closely looked at and audited. Behind online loans are reputable lenders such as banks, which only lend a loan with good creditworthiness and corresponding collateral. Lenders who are not so confident about the creditworthiness of their creditors will in most cases charge significant fees. An online loan comparison is a great way to examine the chances and costs of the loan. The process for an online loan application is the same as for a personal application to a bank. The application must be duly filled out, ideally all documents will be uploaded directly. In contrast to the offline loan application, an additional legitimation / identification of the borrower has to be made here. The offered option is mostly the PostIdent procedure. Modern online banks already offer the VideoIdent procedure. The advantage of applying for an online loan is that at first you only have to enter a small amount of data, most of which is name, address, income and desired credit line. Only when the online credit provider (there are a variety of banks and private lenders) considers lending possible, he asks for appropriate documents to make a final decision.
Providing documents for online credit or personal application to the bank
The provision of documents is identical for the online loan and the personal bank application. The following documents are basically required for the credit decision:
- Completely and truthfully completed loan application including self-assessment and consent to Credit Bureau information ; in the case of missing entries, attach a supplementary sheet;
- Indication of the desired loan amount as well as duration of the loan and possible rate;
- Indication of intended use, if not free loan;
- Proofs of income such as payroll (most of the last 3 months), regular in original, less often in copy (sometimes requested by post for online credit; proof of extra income;
- Employment contract and / or employer confirmation to work;
- Bank statements of the last 2 to 3 months;
- For freelancers business evaluation of the last 2 to 3 years;
- in the event of rescheduling of other loans, appropriate loan documents to prove the duration and amount of the loan and to check the periodic repayment;
- Copy of valid identity card.
Online Loans Vs. personal loan application to the bank
The application for credit in a personal bank account has the advantage that all queries can be clarified immediately in a single conversation and possible doubts of the bank can be eliminated by appropriate explanations. When making an online loan application, there is no personal contact. Therefore, it is all the more important that every detail of the income situation, collateral and completeness of all documents before online filing are examined in detail. The online loan applications are processed in order of receipt and no one can estimate when it’s his turn. Lack of documentation or information raises doubts about the accuracy of the borrower. Too often queries by e-mail and sometimes by phone, which delay the loan payment, this often leads to credit rejection despite good credit. It has to be taken into account when applying for online credit that due to the lack of personal judgment by the bank, the relationship of trust is established exclusively through the written information.
Online loans are the future
The digitization of banks is at a very advanced stage. More and more banks are expanding branches. Thus, the online loan is the future for borrowers. Since the credit seeker is not a bank consultant sitting across, who brings information through targeted questions, the completeness of all information and documents in addition to the credit rating is the A & O for the online loan decision.
How can the borrower additionally influence the approval of the loan application in a positive way?
Banks earn money on loans. So it is the bank adviser, if he can conclude a loan agreement. The bank adviser is subject to numerous obligations. In addition, it is important to keep in mind that many bank employees or credit intermediaries are under pressure to conclude a certain number of contracts. This work causes stress. Therefore, sufficient creditworthiness is no guarantee for a positive credit decision. If the bank finds that the customer is too casual with the documents, numerous inquiries must be made or the customer is cocky according to the motto, ‘a high credit no problem for me’ can have a negative impact. Even those who are in need and begging for a loan, have a hard time. The bank recognizes a certain need behind it and suspects already in advance a bad payment moral. [b] Confident personal banking or short personal cover letter when applying for an online loan can have a positive effect on the credit decision if it avoids additional questions. Anyone who also draws up a financing plan and attaches it to the application is rated positively by the lenders. The lender recognizes behind it the care of the borrower. Reliable action can positively influence the granting of a loan.
Taking into account the following checklist, the borrower fulfills all the criteria that can lead to a positive credit decision:
Checklist for the preparation of the loan application
- Before the application: self-assessment of the creditworthiness
- See all revenue including rental income
- All expenses (rent, if necessary maintenance, further credits, insurance, regular obligations)
- For rescheduling: Banks including details of the bank accounts to which the settlement of the outstanding amounts is to be made
- Provide all necessary documents as described above
- Attach financing plan
- PostIdent Procedure: Credit application documents, current identification, PostIdent coupon from bank or credit intermediary
Never before have the opportunities for the borrower in the credit market been as great as they are today. In particular online, there are countless loan offers. If a loan application is rejected, this is not done by the banks’ unwillingness. If a bank detects that the borrower is unable to repay the loan, it can reject the loan application. Sometimes banks reject too quickly and without giving reasons. Then it pays to ask for more credit online. On the online credit market, there are also some banks that do without Credit Bureau information and yet deal responsibly with lending.