Now that you have already identified a company that can give you a loan, it is time to ask several questions before you accept their money. Yes, you may borrow money online, but is vital to weigh matters. It is not an easy task, but it’s essential and can determine how friendly the loan will be. Some will take you through lengthy processes and involve many people that you may not find it worth at the end of the day. You need to talk to the company to know what you are getting into before signing the loan contract.
Today, borrowers have many options, and the problem is navigating and finding the best. Gone are the days when people depended on banks only to get financial loans for capital investments or buy assets. There are many lending companies, which are as reliable as the traditional banks that offer instant cash loan but some have better terms.
As a borrower, you must be savvier when evaluating the lending companies— here are 7 concerns that you must ask your loan company.
Must I Have Collateral?
When looking for a loan, especially start-ups, most loan companies will ask for collateral. This means you must have some assets because the lender wants to reduce risks. The assets will be scrutinized by your lender to ensure they are enough to reduce risks. So, ask your loan company what assets they accept as security when one is looking for a business or personal loan.
What interest rate and annual percentage rate should I expect?
Most borrowers do not know how a lending company comes up with the loan annual percentage loan. It is usually calculated via a complex calculation process, and interest rate and lender fees are included depending on the repayment period given. Ask the lending company, if the interest will be adjusted at any point and the maximum annual adjustment you may have to deal with.
What are the total costs of the loan?
A loan comes with some other costs, and as a borrower, you are the one to cover them. Ask the lender to let you know what you are expected to pay for before you can access the money. Some of the fees go to third parties such as credit report, pest inspection, appraisals, taxes, recording fees, and escrow where needed.
All these should be estimated and included in the loan estimate document. It is usually delivered after you have applied for a loan. However, you are still allowed to ask for upfront costs before you even send an application.
Is the Loan Approved In-House and How Long Does It Take?
Underwriters and issues report review loans before the loan application is approved or rejected. Ask your lender if their company can handle underwriting for their loans or they assign the job to a third party. Some loans take long, especially due to such procedures.
Most loans are processed within 45 days. However, ask the lending company to give you their anticipated turnaround and let you know about any possible obstacles that could lead to delay of the loan. Some loans take too long to be approved that by the time you get the cash, your investment opportunity is long gone.
Is My Business Credit Score Good Enough?
You may be aware of your credit score, but do you know your business credit score? Sometimes this makes most lenders shun from giving out business loans. If you are a small business looking for a loan, ask the lending company if the business credit score is good enough. However, it is also possible to check with credit bureaus. It may be surprising to realize that you do not qualify for a loan because your score is not good. It happens due to any debts that you have not cleared or didn’t pay back on time.
While you are busy building a personal credit rating, also remember to check how your business is doing. Your credit score becomes the last arbiter of whether a lending company will lend you money or not. Lending companies are quickly scared if they see other business partners saying you do not pay them on time.
What Documents Do I Need?
A big percentage of loans applied do not close because applicants lack proper documents. You may qualify for a loan, but if you do not have the right documentation, you definitely won’t get any money. Talk to your lending company to let you know what documents to include in your application.
Some of the things you need are records of tax returns, financial statements along with your one to two years of financial projections. Not knowing what to take with you when going to a lender makes you look unprepared and unprofessional. It may also prolong the process of loan application as you have to start from square one once it’s rejected.
If Pass On, What Happens to The Loan?
While no one wants to think they will die soon, it is always good to ask the lending company what would happen if you die. Would the loan haunt your family in your absence? Some people even opt to commit suicide when the debts are too many and think the lending companies will stop following up to get paid. However, some go even after borrowers’ life insurance policies. Talk to your loan officer to know the company’s policies in case you are no more. It helps you protect your loved ones because if you had given your house as collateral, the lender would move on by selling it to recover the loan.
Financial experts recommend the use of the personal property or insurance coverage to take care of that. Business debt can ruin your family if you die and therefore speak about before you get the money.
The Bottom Line
Now you know what concern you need to address with your loan company. By doing this, you get to know more before you accept the money. Otherwise, be patient after applying for a loan. Depending on the company you choose to work with, some loans take longer to be approved than others.