Sunday, February 14, 2010

How to get your first bank loan

My young charges are now realizing that having no credit can be as worse than having bad credit, as kid’s straight from college are an unknown commodity.

I make all of my young executives read the timeless classic “Be My Guest”, to see how building a reputation of honesty and good credit can make you healthy, wealthy and wise.

Conrad Hilton bought the Waldorf Astoria on credit!

When applying for your first bank load, you will be asked why you need the money. In some cases, telling them that you want to build good credit is not enough and they will ask you for a specific thing.

In these cases, be aware that your chances of getting your first bank loan are increased when you group yourself with groups of people who have a low default rate.

For example, people who borrow for luxury items have a far lower default rate than people who borrow for necessities:

- Fancy vacation (cruise, Hawaii)
- Cosmetic surgery (boob job, Lasik)
- Designer goods (Rolex watch, Gucci purse, LV luggage)

You will have far less chance if having your loan approved if you give one of these reasons for wanting the loan:

- Stay out of jail by paying child support in arrears
- Buying drugs for re-sale
- Having a profane tattoo removed from your forehead

Tattoo removal is not a good reason to give when applying for a loan

In sum, it’s important for young people to establish good credit, but the reason for the loan is especially important for first time borrowers.