Very few successful business owners have ever been able to create a business empire without outside help. If they didn’t rely on their families for loans, they reached out to banks and other financial institutions for funding.
Business and personal loans are often integral to getting any new business venture off the ground. However, as common as they are, you should never enter a loan agreement mindlessly. Instead, you might like to ask your preferred company some of the following questions so you can be confident in your borrowing decisions.
What Type Of Loans Do You Offer?
Whether you’re working with a bank or an alternative lender like a title loans provider, it never hurts to ask what kind of loans they can provide. Every lending institution is different, so their loan offerings can also vary.
Both banks and some alternative lenders tend to offer a range of business, home, and personal loans. When you meet with your preferred lender, ask for information on each loan type and its suitability for your unique needs. For example, you might explore personal loans for a new car or a business loan to buy new equipment for your business.
How Much Can I Borrow?
For you to consider borrowing money in the first place, you likely need it for something specific. You might need new equipment to grow your business revenue or have a particular car in mind you want to buy and require a certain amount for it.
Asking how much you can borrow can be one of the first and most important questions to ask. Knowing your borrowing potential lets you determine whether it’s enough. You can also ask about repayment terms and how much money you’ll need to set aside to service your loan each month.
While asking about borrowing potential, don’t be tempted to borrow more than you need just because the money is available. You’ll still need to pay it back. If you believe the repayment terms will stretch you beyond your limits despite meeting the lender’s criteria, consider borrowing less.
Can I Borrow With Bad Credit?
Bad credit can be a thorn in your side. A few financially irresponsible decisions can often make it much harder to obtain loans. Many people even find that it has a negative impact on their ability to rent a property or even secure a job when landlords and employers run background checks.
Many traditional lenders view people with bad credit as a high risk. As a result, they can often deny them access to a loan they might desperately need for something important. However, that’s not the case for all lenders. Ask various lenders whether you can borrow with bad credit, and you might be surprised by what you learn.
A number of lenders won’t even perform credit checks or only will in unique situations. Some lenders will take your vehicle title as collateral, which means they are often less likely to deny a loan request due to poor credit. While your interest rates on title loans and bad credit loans can sometimes be higher, they are a preferred option for many people who might otherwise not be able to secure lending at all.
What Interest Rates Can I Expect?
Lending companies don’t make a living unless they charge interest on the money they lend out. Most borrowers know that. However, since interest rates can vary widely across the various loan types, learning your likely interest rates can be important. The higher your risk level as a borrower, the higher your interest rates can sometimes be. This means you can expect to pay significantly more for a loan than someone with better credit.
What Fees Will Be Charged?
You expect to pay interest on a loan, but not everyone knows the fees they might encounter as part of the lending process. Most banks and alternative lenders charge fees to borrow money and are transparent about what these are when you ask.
Some lenders charge a prepayment penalty, while others charge fees when you pay off your loan early. There can also be documentation, setup, and administration costs. Don’t be afraid to ask what fees you can expect to pay as part of the loan process. You might then better understand how much your loan will cost you over its lifetime.
What Happens If I Miss a Payment?
Life happens. You might accidentally forget to make a payment or have fallen on hard times. As a result, it’s only natural to question the repercussions of missing a loan payment or defaulting on your loan altogether.
The implications can depend on your loan agreement and provider. Many providers give you a chance to catch up on payments. They might even negotiate better temporary terms to help you catch up quicker.
However, long-term failure to pay can have serious repercussions. Banks can foreclose on a homeowner with a traditional home loan, leaving them homeless. If you had a title loan, the loan provider could repossess your vehicle. Fortunately, there are many steps and opportunities to rectify your situation before you reach a worst-case scenario.
How Can I Apply for a Loan?
If you’re new in business or have simply never applied for any kind of funding before, you might not know what’s involved in the process. Most lenders, including banks, do their best to make the process as straightforward as possible.
Many lenders have online applications, allowing you to apply for a loan in the comfort of your own home. However, if you are applying for a large business loan, you might be required to meet with a lender in person with your business plan in tow.
For small loans, in-person meetings are not always required. Typically, you can provide them with digital copies of important documents, and they can make lending decisions based on those. Most lenders ask for some of the following:
- Government-issued ID
- Proof of income
- Bank statements
- Contact information
- Regular expenses information
- Debt information
Taking out a loan, large or small, is a big decision. You deserve to have all the facts to make a well-informed decision. Don’t be afraid to ask your preferred lender some of these questions above. You might then feel more confident to sign on the dotted line.