Mark Hauser, a typical American, has had a life of financial instability and credit card debt. He is now adjusting to his lifestyle to help him achieve long-term wealth. Mark Hauser explains how lenders in the United States consider seven critical criteria when granting consumers loans. This blog post discusses these criteria and what they mean for consumers seeking loans.

1. The Applicant’s Credit Score

Mark Hauser’s consumer experience taught him that when lenders make decisions, they consider the applicant’s credit score. The information from three credit bureaus determines a consumer’s credit score: Equifax, Transunion, and Experian. The bureaus collect information about a consumer’s potential for repayment.

2. Employment History and Income

When securing a loan, the lender checks the consumer’s employment history and income. Mark Hauser learned that you can still secure a loan if you are unemployed. However, your chances of getting a loan are better if you have good credit and income.

3. Debt-to-Income Ratio

When applying for a loan, the lender will ask if the consumer can repay existing debt and qualify for a higher level of credit. Hauser learned that lenders generally look at the total amount of all debts, including other debts like credit cards.

4. Available Liquid Assets

The lender will increase the chance of qualifying for a loan if a consumer has liquid assets such as cash savings, stocks, bonds, and real estate. Interest rates on loans are lower when compared to rates associated with credit cards and car loans. Therefore, consumers with little cash available may apply for higher interest-rate loans.

5. Value of the Loan Collateral

Mark Hauser learned that the value of loan collateral is significant for lenders. A loan with collateral is less risky for the lender because an asset can be seized in case of default. Hauser found that when applying for a loan, consumers must submit paperwork regarding the value of their property and an appraisal or detailed inspection.

6. Amount of the Down Payment

Hauser learned that a consumer’s chances of receiving an approved loan are higher if they make larger down payments. Lenders see this as a positive reflection of their financial responsibility.

7. Term of the Loan

The loan term is essential to the lender because it helps determine when a consumer can repay the debt. Hauser learned that, in general, loans with longer terms have higher interest rates than those with shorter terms.