How to Be a Responsible Borrower
There are countless circumstances that motivate you to borrow money, including paying for an unexpected bill, financing a major purchase, or even taking a well-deserved vacation. Whether you borrow from a bank via a personal loan or you choose a local lender that offers loans based on the value of your vehicle, you take on the responsibility of repaying the amount you borrowed. When lenders see you have the qualities of a good borrower, you are more likely to have an opportunity to secure the financing you need at an affordable rate. Here are a few tips on how to be a responsible borrower no matter where you apply for your next loan.
Every lender wants to know that the money loaned out to a borrower will be repaid on time and in full each and every month. Being a good borrower means you have a track record of paying your bills when (or before) they are due without fail. If you’ve had a few financial issues in the past related to missed or late payments, traditional lenders like banks and credit unions may ask you why. Other lenders that do not check credit history or score during the application process may be less worried about missing a due date, but being a good borrower means you make an effort to pay on time.
Applications for loans, whether secured or unsecured, require some degree of documentation. A title loan lender, for example, needs to see that you own your vehicle free and clear by reviewing your vehicle title. Similarly, banks want to understand how your income helps support your monthly debt obligations by reviewing a pay stub or bank account statements. Being organized by having these documents ready to go at the time you apply for a new loan is the most common overlooked qualities of a good borrower.
You Have Discipline
When lenders review your credit history to determine how much risk you pose as a new borrower, one of the factors evaluated is how well you have used available credit in the past. Running up credit card balances to or above your credit limit or taking out numerous loans in a short period of time without paying off what you owe doesn’t work to your benefit. Being a good borrower means you have access to credit when you need it – but you don’t overdo it!
One of the most important habits of responsible borrowers is showing they can be trusted. Both personal loans and title loans are often significant sums of cash, and lenders need to know that you aren’t going to run off without paying a single dollar back. Any lender offering you a loan can tell you are trustworthy when what you tell them matches the documentation you provide and the information you include on your application.
Even though not all lenders look at your credit history and score to determine if you are a good candidate for a new loan, nearly all take the habits of good borrowers seriously. Before you pursue a new loan, make sure you have the qualities of a good borrower, so the process of getting the money you need at an affordable cost is as easy as possible.