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A loan application is used by borrowers to get a loan. Bankrate explains.
What is a loan application?
A loan application is used by borrowers to apply for a loan. Through the loan application, borrowers reveal key details about their finances to the lender. The loan application is crucial to determining whether the lender will grant the request for funds or credit.
When a prospective borrower wants to take out a loan, she can either go to a bank’s physical location and put in a paper application or apply online. Loan applications are needed for any type of loan, whether a revolving loan such as credit or a debt instrument such as a mortgage or auto loan.
The first details relate to contact information, including current physical address. From there, the form asks for everything from financial history to property owned. Information like salary and other sources of income may be requested. Additionally, the application may include a necessary credit check.
The application will ask for the loan amount needed and may request that the borrower specify a term. The lender will charge different rates of interest depending on where the borrower lives as well as whether the borrower is married and applying jointly.
Filling out the application can require outside sources that the borrower must include with the final draft. Individuals must sometimes attach federal as well as state tax returns to the application.
Before applying for that loan, check out this helpful loan calculator.
Loan application example
After finding the house of their dreams, a couple decides to apply for a mortgage with their bank. They use their bank’s online banking system to apply for the loan. The site asks them basic questions about their finances, including how much they earn and what they do for a living. They log in to the site with their secure user info and the bank already has their information on file. After indicating how much they want to borrow, they submit the application and will hear back shortly from the bank.
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