Banks eased lending standards in 2010

[Feb 18, 2011.]

 

Consumers had an easier time getting loans in 2010, compared with previous years, according to a recent Federal Reserve survey of senior loan officers. Banks were more willing to make installment loans and began easing standards for credit card applications.

Banks are expected to approve more loans this year. "About 50 percent of banks, on net, expected improvement this year in the quality of consumer loans, including both credit card loans and other consumer loans," according to the survey. So what can you do to improve your chances for getting a loan?

• Cut your debt-to-income ratio. You can do this by either paying down existing debt or boosting your income. Why not get a second job or start a home business in your spare time to put toward credit cards, auto loans or other loan payments? You may find that once you have a new stream of income that you don't actually need to turn to a personal loan. If you can't increase your income, find a way to cut your expenses in order to have more money for debt payments.


• Get rid of poor financial habits that are holding you back. Banks frown on loan applicants who have a track record of paying bills late, overdrawing checking accounts and other poor financial habits. Maybe you need to get better organized so you don't miss payments. Missing payments on credit cards can result in late fees and an interest rate increase that can keep you chained to debt.


• Get a loan from a peer-to-peer lender. The underwriting standards usually are not as tough at a P2P lender, although you still may need a certain credit score to qualify for a loan. There is no guarantee that you will be approved for a personal loan but it is worth a shot.


• Offer up some collateral. While you may not qualify for an unsecured personal loan, a lender may be willing to let you borrow money if you have something that can be used as collateral. The collateral could be a boat, jewelry, artwork or something else that has significant value. Avoid using family heirlooms as collateral unless you are willing to part with them in the event that you default on your loan agreement.

Banks are not the only place you can turn to for a loan. Consider applying for a personal loan from a credit union or even setting up a loan agreement with a friend. Just make sure that if you are approved to borrow money, you can actually afford to pay it back.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.