In many commercials or ads for loans, you may hear something like “rates subject to credit approval” or “upon credit approval”. But what does that mean for you?
To break it down, how we determine our loans and the interest for them is based on more than just your credit score. Your credit score plays a big part in the interest your loan will receive, but it isn’t the sole determining factor for your loan approval.
Debt to Income
When you apply for a loan with us, we pull your credit report which contains your credit rating as well as your monthly debt such as other loans you are paying on and any collections you may have. We total up all of your expenses and look at your monthly gross income to get what we call a debt to income ratio. That ratio is not allowed to exceed a certain percent without manager approval. If it does that flags us that you may have excessive bills in comparison to your monthly income, which could be a determining factor in a denial for a loan.
We also compare secured and unsecured trade lines that you had/have. We look at the original loan amount, the monthly payment and we compare the term of the loan to how long you made payments on time. A secured trade line means something is being held as collateral in place of the loan. Unsecured trade lines are things such as credit cards, student loans and lines of credit. When looking at the unsecured trade lines we look at the credit limit and what is owed, which tells us how much capacity you have to borrow.
The Benefits of Risk Based Lending
Our type of lending works in favor of someone with less than perfect credit or who may be just starting out, as well as people who may be well established. Credit Unions often offer minimal fees and lower rates than other entities impose. For example, other entities might limit financing due to the age of the collateral, where as with Lake Chem the rate and term is based on your credit rating, not by the age of the collateral.
If you have any questions about our loans or would like to apply for one, please feel free to reach out to our lenders at any of our three locations in Draffenville, Calvert City, and Murray! Our loan process is done in house, and indirectly, and by local people. What that means for you, is you could get a loan you need, the same day you come into our branch and say you need it. It’s like banking, only better!