Preparing For a Loan Interview

Filed under Loans

Preparing for loan interviews can be a nerve-wracking experience. However, if you know what to expect and are properly prepared, the process becomes a lot less daunting. Here are some helpful tips and guidelines to prepare you for a loan interview.

Good Relationships with Banks

Before you even get to that interview, the most important thing for you to know is that one of the most helpful ways to get a loan is to have an existing, positive relationship with the bank who is issuing the loan. The more positive business history you have with that bank, the more likely the bank will lend you the money.

Once you have that relationship in place, it helps to have some ideas of what questions to expect at the actual loan interview. Here are some questions to help you prepare and of what to expect.

Loan Interview Questions

• What do you need the money for?
• What are your name, address, and telephone number? (Protip: if you rent, you’ll also be asked to provide the same information, but for your landlord)
• Have you lived at your place of residence for more than two years? (If not, be prepared to give your previous address)
• Where are you employed?
• Do you have any other income sources?

Of course, for some questions, these banks can’t just go on your word alone; they require proper documentation. Here’s what you absolutely need, along with a few helpful suggestions:

• Proof of employment that includes your employer’s name, address, and telephone number: usually a recent pay stub satisfies this, a letter from your employer that verifies your employment also satisfies this requirement.
• Documentation of any other income sources, such as rental income, dividends or proofs of collateral.
• Helpful: Proof of address.
• Helpful: If the loan is for a business, projected cash flow statements are a good idea.

A loan interview, whether it is an auto loan interview, personal loan interview or home loan interview, can be difficult, but being prepared helps. Having a history with the bank, having an idea of the questions, and knowing the proper documentation to bring will help ease your worries. So now that you know what to expect, take a deep breath and get prepared!

Tags: Loan Interview Questions

Benefits of Adjustable Rate Mortgages ARM

Filed under Loans

An adjustable rate mortgage, or ARM, is a mortgage whose interest rate changes. This is in contrast to a fixed rate mortgage, whose interest rate is fixed for the duration of the mortgage. The interest rate on an adjustable rate mortgage is usually some interest rate index, such as LIBOR, plus some fixed amount.

Lower Interests with Adjustable Rate Mortgages

Since the lender takes on the risk of interest rate changes with an ARM, the initial interest rate paid is usually much less than a fixed rate mortgage. This means that monthly payments on an adjustable rate mortgage are lower than the monthly payments of a fixed rate mortgage.

An ARM may have a cap. A cap is a set limit on how much the interest rate can change. A periodic cap limits how much a rate can change in a single period, while a lifetime cap limits how much a rate can change over the entire life of the mortgage. Caps can limit the risk you take on.

An ARM usually starts out with an initial amount of time that the interest rate remains fixed before adjusting. A 10/1 ARM refers to a mortgage whose rate will remain fixed for the first ten years, and then adjust every year thereafter, while a 7/1 ARM refers to a mortgage whose rate will remain fixed for seven years before adjusting every year. Many people take ARM’s instead of fixed rate mortgages because they need the cheaper starting rates and expect to be in a better position in the future to pay a higher rate should interest rate rise when it is adjusted some years later. Since the interest rate doesn’t usually adjust for the first few years, an ARM is, in most instances, superior to a fixed rate mortgage if you plan on moving after only a few years.

Whether an adjustable rate mortgage is right for you or not depends on your particular circumstances. In general, the only time you shouldn’t consider an adjustable rate mortgage is if you know for certain that you will be staying in your house for more than ten years. Otherwise, it is likely that an adjustable rate mortgage can save you money on monthly payments.