Responsible lenders evaluate each client individually, whether your financial situation is appropriate for the loan or your credit limit. What exactly is a credit limit and how is it determined? We at Mill Smick have prepared a review to keep you informed of the credit granting process. Find out!
Credit limit – the maximum amount of credit available to you
When you apply for a loan, the lender, including us, evaluates it and creates the best deal for your situation. The credit may not be greater than your income, so take into account that the loan you have requested may be denied or a lower credit limit than originally expected.
Instead, you will be offered an estimated credit limit – the amount of the loan that the lender is prepared to grant you, confident of your ability to repay it. Read on to find out exactly how customers are granted a credit limit!
Your credit limit may vary with different lenders
The basic requirements of each lender, which determines how much credit limit you have available to you, mention the customer’s age and nationality, but they are just the top of the terms.
The most common factors for evaluating applications are the three factors by which the credit decision is made and the credit limit set for a particular client:
- Solvency is the key measure of credit limit. The lender will determine the amount appropriate to your income;
- credit history – If you have a history of loan repayment problems, you may be denied credit services altogether. However, if a lender has agreed to grant a loan, credit history problems can significantly reduce the amount of credit limit a customer is granted;
- previous cooperation with the lender in question – if you have already had a loan with a particular lender, your previous cooperation, such as whether all payments have been made on time, will be taken into consideration, which can significantly affect how high a credit limit is to each customer.
Can the credit limit be increased?
Depending on your cooperation with different lenders and your financial situation, which can change dramatically, your credit limit will not always be the same – after a late loan repayment or a decrease in income, your credit limit for your next loan will be lower.
However, by borrowing responsibly and wisely planning your finances, your credit limit can be increased if you:
- Make sure that all your loans are repaid on time – successful cooperation with your lender can increase the credit limit of your next loan with the same lender;
- attracting a guarantor – if the lender offers such an option, the combined solvency of the guarantor and your guarantor will be assessed, thus increasing the credit limit granted to you.
If the lender does not accept the use of guarantors, you can try to extend the loan term, which would reduce the monthly payments. In this case too, your credit limit may be increased. However, when you extend the loan term, you need to be absolutely sure of the stability of your income and the adequacy of your financial situation throughout the repayment period. We at Mill Smick believe that you should honestly review your situation before borrowing. There is no point in doing anything to increase your credit limit if it subsequently worsens your credit!
Evaluate your financial situation yourself!
Although a lender can look at the details you provide and calculate exactly what type of loan, credit limit and maturity would be right for you, it is up to you to know your financial habits. Your situation may be credit-worthy and you can have a large credit line, but can you plan and organize your finances several months ahead? It’s important to ask yourself this and other questions to make sure you’re ready for the loan!
The loan is a responsible decision – take it wisely!
There are several loan options, but you need to be sure that this is the best option to deal with. Even when your credit limit is already set, remember that this is the maximum amount your finances can cover, so don’t hurry to apply right away. Borrow only what is necessary to minimize the impact of credit on your daily life.
To understand whether you have thought through your loan, answer three questions honestly.
- Do I really need credit? Apply for a loan if your expenses are important or urgent, such as a doctor visit or home improvement. As a reminder, do not borrow to cover any other credit;
- Is my financial situation commensurate with the amount of credit? The easiest way to test this is by calculating 30% of your regular income. This is the amount that your monthly credit payments should not exceed. Also, you need to be sure that your income will not decline throughout the loan repayment period;
- Have I read and am confident that I will be able to meet all the terms of the lender? If you have any questions after reading the terms of the contract, consult with the lender’s client advisors, who will help dispel any uncertainty and make a more informed decision.
When and how to borrow?
There are three ways you can borrow – by contacting a bank, lenders to the non-bank sector, or asking for help from a private individual. Most of the loans that can be made with a bank are long-term loans, but non-bank lenders offer short-term loans. What’s the difference?
Borrow credit at the bank
The question of where you can get your money, if you need it in large amounts, has been solved – at the bank. Banking lenders offer various types of credit, such as:
- consumer credit;
- credit line;
- study loan;
- car loan etc
Typically, such loans are made to, for example, make or repair a home, go on a long-planned trip, spend money on an event, or buy a car or household item. In most cases, the bank where you borrow money offers only long-term loans, which can only be obtained through a bank branch. How to settle a loan with a bank?
How to borrow at the bank?
There are several steps you need to take to borrow:
- go to the branch of the selected bank;
- apply for your loan;
- submit the necessary documents requested by the lender;
- wait for the application to be evaluated;
- concludes a contract and receives money.
It should be remembered that both the settlement and repayment of the loan will take longer than borrowing from the non-bank sector and should be taken into account before making the loan. But how is it to borrow money from a non-bank sector lender?
Credit limit at non-bank sector lender
Nowadays, in the 21st century, the supply of non-bank lenders has grown significantly, as has the demand for them. More than 100,000 people get credit from non-bank lenders every year, but it’s important to realize that such a loan cannot serve as a monthly income source, as every quick loan has to be repaid within a specified period. Offers from non-bank lenders include:
- quick loans;
- car loans;
- credit line etc.
The company and its wide range of desires, as well as the offerings of lenders and each individual credit limit, are large and it is important to choose the one that best suits their desires. Follow the article to find out what to do if one of the options offered by non-bank sector lenders seems right!
How to borrow from a non-bank sector lender?
If it seems like borrowing from a non-banking sector lender is the right way to raise additional funds, here are some simple steps that will save you time:
- find the one that’s right for you. Information on each lender is widely available on the Internet. Explore it and find out which one best suits your desires;
- registered. Personal information is required at check-in;
- submit an application. The application must state the amount of the loan you want and the repayment period at which you plan to repay the loan. You can borrow as much as each lender has indicated, up to a minimum or maximum amount;
- wait for approval. Once you submit your application, it will be considered by the lender (if it has happened during the lender’s business hours). You will receive a message with the lender’s decision to grant the loan in the form of a text message;
- receive. The final step in the borrowing process is getting the money. You will not have to leave the house to receive it, it will take the form of a transfer and you will receive the desired amount in your bank account.
Every loan is a risk, but a well-considered loan can be a handy solution when you need additional funds. Be safe and make a responsible decision! We, Mill Smick, remind you to evaluate your credit repayment options before applying!