The Process of Attaining a Loan?

Answer 1

Many instances will arise during the course of a person’s life when they need or want to purchase an item for which they do not have enough accessible cash to do so. A few examples of such items would include a car, boat, motorcycle, home, or other big ticket item. In order to pay for these purchases and many others, most people will decide to take out a loan. Loans can be obtained from banks, credit unions, and other financial or lending institutions. A loan is a binding contract between a borrower and lender, and is enforceable by law.

When a person makes the decision to take out a loan, they agree to pay the lender back in a specified period of time. In addition to repaying the principal, the borrower will also be required to pay interest on the principal amount of the loan. This interest is a fee charged by the lending institution for the use of their money. Depending on the institution, there may or may not be other fees associated with securing a loan. The borrower also agrees to make timely payments at regular intervals, usually one every month. If the borrower misses a payment or is late with a payment, the lending institution is permitted by law to take legal action against the borrower.

Although many people would like to take out a loan, not everyone will be approved to do so. Each lending institution will have its own guidelines and regulations as to the requirements that must be met before a person can be approved for a loan. These guidelines typically are concerned with the annual income of the potential borrower, as well as any current debt he or she may have. Lending institutions also use a person’s credit score and credit report as a basis for deciding whether or not to lend to the individual. The loan process can often be a long one, as the potential borrower must submit many different pieces of paperwork to the lending institution for review. However, after the loan application has been accepted by the lending institution, the borrower will usually receive the benefits of the loan in a very timely manner.