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Bank Loans

Daniel Cohen
UpdatedJun 22, 2012
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    3 min read
Key Takeaways:
  • There are different types of bank loans available.
  • You are judged on the same main factors, for all bank loans.
  • Shop around to find the best loan.

Bank Loans and How to Qualify for One

Want to make a big purchase, but don’t have enough money to pay for it in full? Bank loans are a great solution, for many different types of purchase or needs.

Types of Bank Loans

There are a lot of different reasons you may apply for a bank loan. Some of the most common types of bank loans are:

  • Auto Loans: More than 12 million new cars were sold in the USA in 2011, so it is no surprise that auto loans are one of the most popular types of loans available.
  • Student Loans: College costs keep rising and so does student debt. Total student loan debt topped 1 Trillion Dollars. Bank loans to finance college costs are private student loans, different from the types of federal student loans offered by the government.
  • Personal Loans: Personal loans are offered by banks for a number of uses, including to consolidate debt or to pay for an important, unexpected expense, like a medical need.
  • Home Purchase Loans: Almost everyone who buys a home takes out a loan to pay for it. It is extremely rare that a home purchase is made for cash. Some bank loans to finance a home purchase may be government-guaranteed and require a smaller down-payment, like FHA loans or VA loans.
  • Refinance Loans: Refinance loans have been booming, driven by the historically low interest rates available. Refinance loans come in different term lengths (30-year, 15-year, etc., and can be fixed- or adjustable-rate loans.
Quick Tip

looking for a home loan, either a refinance loan or one to finance a home purchase? try one of’s pre-screened mortgage partners and find a lender who will give you a great deal.

Qualifying For Bank Loans

To qualify for any of the different bank loans listed above, you have to meet the banks lending requirements. The primary factors the bank is going to examine are your:

  • Credit: Your credit score and your credit history will be looked at. Banks primarily look at your FICO score, your record of late payments, and whether you have any judgments against you or collection accounts currently outstanding. You can get the best interest rates that are available, if you have excellent credit. Even with an excellent credit score, you may have to pay off any collection accounts or judgments, before your loan is approved.
  • Income: Your income is a very important factor, but the banks do not judge you based just on your income. Instead, they look at your debt-to-income ratio (DTI), the percentage of your gross income that you use to pay your housing costs and monthly credit card and other loan payments. For a home loan, you generally need a DTI no higher than 44%. A DTI higher than that will disqualify you from many loans.
  • Collateral: If you are looking for a bank loan that you secure with collateral, you often can get a better interest rate. Rates are lower because secured loans are less risky for the bank.

Shop Around

The only way to find the best rate on any bank loan is to be an aggressive shopper. That means you have to check with multiple sources. Keep in mind that when a creditor pulls your credit to qualify you for a loan, the inquiry has a small negative effect on your credit score. Each inquiry made will be listed on your credit report, but, any inquiries made for the same product within a two-week period count against your score only once. Therefore, make sure you do your loan shopping within a two-week period.