How banks decide who to lend their money to.

1st off there are different types of creditors there are the traditional I need ok to good credit lenders and there are the high risk lenders, this answer only applies to the traditional lenders such as banks and credit unions.

A. Banks will 1st look at your credit bureau to review your repayment history as reported by other lenders they look at this to determine if you have repaid or is repaying the amount borrowed in a satisfactory manner. This usuallly means that you've paid or is paying atleast the minimum payment before the due date every month and that you are not over the account limit on the closing date.

B. Banks will also look at your current debt load to make sure that your minimum payments, your basic cost of living and the new loan you are seeking can be comfortably covered by your income.One common misconception is telling the bank that you pay a big monthly rent is a good thing, actually its not if you live with family say that, if you pay nothin for rent say that - the less you pay for things like rent the more the bank believes you have to make monthly loan payments therefore qualifying you for a bigger loan. (If your income falls short they will probably ask for a cosigner to add income strength to the application)

C. Loans are easier to approve when the Lender is in a cant lose or almost cant lose situation for the, therefore the banks are always more willing to lend if you are willing to put up security such as a new model vehicle or a home.

Usually if the above 3 things look good to them you will be approved the application.. Keep in mind things such as market conditions and the economy will affect these decisions and you may find times when the bank will need you to over qualify before giving you a loan.

Please dont hesistate to contact us if you have specific questions or need help making your loan application look more attractive.

by Omari Whyte