How To Apply For a Loan

When you find yourself in need of money for a large purchase, such as a car, house, or education, chances are you’ll be looking to apply for a loan. While the actual application process for a loan isn’t usually too difficult, there are some things to review, evaluate, and prepare before deciding on a loan and mortgage lender.

Review your credit and score

When you are getting ready to apply for a loan, the first step you should take is to request your free annual credit reports and make sure that all of the information contained on the credit report is accurate. While requesting a credit score usually costs extra money, knowing your score may be worth the price when making a major purchase because you’ll know exactly where you stand from the lenders' point of view. Borrowers with a higher credit score are more likely to obtain a favorable interest rate and borrowing terms.

If your score and credit report aren’t perfect, you may consider waiting to improve your credit before proceeding with your loan applications. There are some things you can do to improve your credit and following those steps may help you get a better interest rate.

Evaluate lenders and loans

Once you are happy with your credit report and score, it’s time to evaluate loans and lenders. When doing this, look at the various terms available to you. Instead of just looking at the monthly payments, determine what the total cost of the loan is going to be, over the entire term, including principal and compounded interest. 

Prepare necessary financial documents

When going through the process of applying for a loan, there are some documents and information that you’ll need to have available to provide to the lender. If you can have these documents available in advance, it will make the entire process run more smoothly. While the documents may differ by lender and loan amount, in most cases you’ll need proof of income, such as pay stubs and/or prior year W-2 forms, as well as savings and investment account statements. 

Make payments on time

Once you have been approved for your loan, keep your end of the bargain by making your payments on time.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.