Improve your chances of getting a loan. Poll: Would you lend money to a relative?

Just as lending has tightened on small businesses, everyday consumers are finding it difficult to get loans as well. The basics — having good credit, proving you have the income to repay the loan and having money for a down payment — apply to anyone asking a bank for money. Once you’re sure you really need a loan and have a plan for repaying it, here are a few tips to get you started:

  1. Before applying, get your credit report from all three credit agencies. Give yourself time to dispute any errors. You can get your credit report free from AnnualCreditReport.com.
  2. A credit score of 700 or above will get you a competitive rate, said Bankrate.com’s Greg McBride. It’s a tougher landscape if your score is below 650.
  3. Pay down debt. In the world of lending, the best prepared come out winners. Take the time to reduce your debt before knocking on a banker’s door.
  4. Cash speaks volumes. If you have the money to place a down payment, you’re less likely to default on a loan. Showing lenders you have a stake in the game makes them more willing to work with you.

To improve your chances of getting a small business loan, ask yourself these questions:

Do you have a strong business plan that shows specifically what you’ll do with the loan?

–  Can you show how you will repay the loan? Projecting where or how you’ll make money in the future, and how that will go toward repaying the loan, is important.

– What other assets do you have? A lender will want to know if you default, there is something else they can fall back on. Also, you’ll want to prove you have a history of getting and repaying credit and that your personal and professional finances are in order.

Question: Because loans are so much more difficult to obtain, would you be more open to lending money to a relative or close friend? Have you borrowed money this way rather than through a bank?

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9 comments Add your comment

Danielle

April 28th, 2010
3:19 pm

Highly unlikely. I don’t lend more than I can afford not to get back. Unless the person needed a small amount, I would have to say no.

Amanda

April 28th, 2010
3:48 pm

Nope – never a good idea. It puts incredible strain on a relationship. If a family member or friend was hurting, and I was able, and I knew they’d use the money responsibly, then I’d gladly give it to them and not expect it back.

Aziz

April 28th, 2010
4:13 pm

I have loaned my relatives numerous times. I have also lost several thousand dollars in the process because they don’t have the money to pay me back now. A bad bad idea for investment. My intent was just to help them out.

N

April 28th, 2010
4:24 pm

No way would I lend money to a friend or relative. Seen it ruin too many relationships and causing much unneeded stress.

Becky

April 28th, 2010
4:35 pm

Oh h3ll no would..Been there, done that, never again..Have 2 brothers and a sister that are to sorry to work and they think that just because I work, I should just fork over money anytime..

Karen

April 29th, 2010
8:25 am

Either I would give it to them outright or not at all. A loan is any money that you can survive without–if you never see it again.

Tinytam

April 29th, 2010
11:08 am

Never! Just doesn’t feel right having to shake them down to pay you back and the stress on the relationship that it can cause. Now I have allowed family/friends to “borrow” money in the past but none have ever offered to pay a dime back. I borrowed $100 from my mother about eight years ago and promptly paid her back. That’s the only time I’ve borrowed from a relative in my entire adult life.

Byron Mathison Kerr

April 29th, 2010
1:20 pm

Voice of Reason

April 29th, 2010
5:27 pm

I’ve loaned money to a relative but at the moment in my head, I’ve written it off as a gift. Sometimes I get a gift back, sometimes I don’t. But that’s how it goes with gifts, I don’t even give one while expecting something in return.

I however have borrowed money from a CLOSE relative. Generally just mom and my big brother, and of course have paid it back, even though I’m sure they also have written it off as a gift in their heads.

In my family, we give when we can because we know the other person would do it for us. Also, we know its not going to something stupid. We only go to each other as a last resort.