The United States of America is among the richest and the biggest economies in the world which mostly is categorized in financial terms. This makes the country very viable in terms of borrowing and lending money. There are multiple lenders of loans in the country where one can access loans at lower interest rates which serve as an encouragement for the residents to borrow more. In the current life, most people have dreams of starting their own ventures however capital always serves a stumbling block for many. Applying for a loan, therefore, serves as a huge financial step for many. There are different types of loans which range from secured, unsecured, fixed rate and variable rate loans. Applying for a loan whether small or a huge requires one to meet general eligibility criteria. Such eligibility in the USA includes
The borrower needs to be of 18 years and above.
The Borrower needs to be a United States citizen or bear permanent residence or they are required to be living in the US. On a valid and long-term Visa.
Lastly one need to be a holder of a bank account in the USA which is verifiable.
Lending in the United States varies upon the criteria set by the individual lenders however there are main factors which are critically considered when evaluating whether the borrower is qualified for a loan or not.
The employment criteria are distinct between various lenders available. Some require the borrower to be a fulltime worker for them to be considered to qualify for a loan. Nevertheless, for those who are part-time workers or are self-employed, they are provided with loan options. Majority of lenders have been verified to be lenient on those with stable employment. For the unemployed borrowers, they can be considered as qualified for a loan in the event that they can acquire government benefits or rather allowances as income however the need to demonstrate their capacity to repay the loan while still on those benefits is a requirement for them.
A steady income is vital for one to be considered as viable for a loan in the USA to ensure that the borrower can meet the instalments without failure. In addition, in case the borrower is applying for a larger amount of loan, the minimum amount of income must be presented to the lender before applying for the loan.
Upon application for a secured loan, which may include a mortgage or an auto loan, the borrower has to provide collateral to act as security in the event that they default. In the case unsecured loans, it is collateral free hence the need to factor in the borrower’s credit score.
A credit score is a rated against the payment behaviour. In the USA a good payment behaviour acts as the easiest ticket for lenders to qualify the borrower for a loan, especially bank loans.
This is the limits for credit score in the United States for personal loans.
300-629: Bad credit
630-689: Fair or average credit
690-719: Good credit
Above 720: Excellent credit
Debt to income ratio
Debt-to-income ratio is another strategy used by lenders to approve a loan application by simply comparing the debt and the income the borrower has. The more income the borrower has in comparison to their debt the more likely they are of being approved for a loan.