This guide covers various things about how to apply for a loan. We deal with loan application questions like: how much can you get a loan, how does a credit decision evaluation work, and what if your bank doesn’t approve a loan?
Loan, How Much Can You Get?
The question of how much you can get a loan comes up in many ways when it comes to applying for a loan. Can you get enough loan to buy the car or vacation that you dream of?
When looking at a loan, you should focus on how much you need the loan – and what you plan to use it for. Instead, maximizing your loan amount is never a good goal.
Also read: The loan application process – how does it work?
The amount of the loan depends on the applicant
How much you can get for a loan depends on many things. Applying for the largest loan is hardly worth the pleasure of applying for a large loan. Instead, you should think carefully about how much you need a loan.
Applying for a loan and the amount of the loan are affected by, among other things, the applicant’s income and payment history. The basic requirements for getting a loan are usually regular income (such as a job or retirement income) and pure credit history.
If the applicant has a default payment, the loan is usually not available. Only a very few lenders differ from this. However, one exception confirms the rule, but GoodBank also offers GoodBankPrivat loan to the creditless. However, they also have a tight screen: Applicants must have no new default payment entries in the last year. If the applicant has older credit malfunctions, they must have been completed, ie they must have a ref entry.
There are rules of thumb for how big loans a customer can get. For example, Good Finance often assumes that a consumer credit can be obtained three times its monthly income.
Instant Leverages and Loan Limits
Following the tightening of the Quick Leverage Act, many companies have shifted to offering larger loans. The Quick Leverage Act and its interest rate cap only apply to loans of less than $ 2,000. The interest rate cap is based on the principle that the effective annual interest rate of the loan may not exceed 50%. However, the reference rate is not taken into account by the interest rate cap, for example, the annual interest rate with the reference rate may be 50.2%, for example.
In practice, however, many companies offer so-called “flex” or “limit” loans. They always get a loan limit of more than € 2,000, usually € 2,100, when applying for a loan. This is despite the fact that the customer would apply for a loan of, say, EUR 300. When the loan is more than EUR 2,000, it is not subject to the interest rate cap on instant loans. Thus, the annual percentage rate of charge may be significantly higher than 50% and the reference rate.
There is no obligation to increase the entire loan limit, but the customer can only increase the amount he / she intended, for example, EUR 300. However, the customer may be tempted to raise the whole of just over € 2,000, since it is still possible. However, in this case, keep your head cold and remember that you should not borrow more than is necessary.
Focus on total costs
Whatever the loan amount, in the end, always pay attention to the total cost of the loan. One good metric should not be confused, such as low monthly interest rates or low opening costs, but should focus on the whole. However, in the end, you will have to pay the full cost, so it is a good idea to get there first.
Total cost refers to all costs that come with a loan. Another measure used is the effective annual interest rate. The annual percentage rate of charge is expressed as a percentage and includes:
- loan processing costs
- the advertising costs to be paid for the loan
- loan opening and service fees
The example helps you to understand why outlining total costs is important, rather than focusing solely on interest, for example. Even a large loan does not necessarily make you happy if you find it expensive in the long run. The loans are not the same, so a comparison before making a loan decision is a good idea.