Millions of
individuals either have or are seeking out a significant loan. They have many
reasons for these loans. Some individuals are looking to buy a new house or
car. Others want to start their own business and live their financial dream.
For these individuals, there are a set of expectations and ideas about how to
ask a bank for a loan. But these individuals need to start thinking more like
the individuals who work at lending institutions. Lending institutions have
their own goals and values that are met by the loans they hold. Understanding
these values can help an individual better navigate the loan application
process.
Liability
Debts are often considered as a liability on the balance sheets of lenders. They have to view their loans in this way in order to preserve their bottom line. The financial point of a lender is to make money off the loans that they give out to individuals. They trade interest for the risk inherent in every individual who takes out a loan. To lenders, borrowers pose the slim risk of not repaying their loan and losing the lender significant money.
This status is why lenders give out loans and set interest rates/terms based on an individual’s credit score and credit history. A higher interest rate will help them cover for the greater likelihood that they may lose some or all of their money over time. Truman Advisors suggests that individuals make their financial position clear and leave no doubt that they will pay back their loan and meet all payments on time.
Opportunity
Lenders also see loans and borrowers as a possible opportunity. There is a positive side to the calculations that lenders make about how an individual will pay back their loans. While they are certainly worried about default, they are much more interested in the opportunity that a loan provides. Banks and other lending institutions want to do good in the community with their loans. They want loans to be the first step to prosperity. This goal is both altruistic and financially sound. Individuals who are successful and pay off their loans will have a business that thrives for many years.
Eventually, they will want to expand again and will respond by borrowing more money from the lending institution that originally made their loan. Truman Advisors notes that a bank will secure years of potential business by working with the right individual. Individuals need to keep this aspect of lending in mind. Their pitch should be more focused on the success of their idea and potential backers. They should minimize a focus on simply paying off their loan in time. Institutions will assume that their money will be paid back and want more substance out of individuals applying for loans.
Conclusion
Individuals who want to take out a loan need to consider both aspects of lender calculations. They need to make sure that they are presenting themselves as a low credit risk. But at the same time, they must show how their project will be successful and beneficial to the world. Individuals have to think like lenders and present the best possible portrait of their lending needs in order to secure the most generous terms possible.