Financing your major purchases can be stressful. Whether it’s a HELOC for renovations, or a personal loan to start a business, you’ll have to make an all-out effort to convince skeptical lenders to lend you money.
And this is where Figure comes in. Our mission is to provide financial solutions for customers through fast, convenient, and secure processes.
For people who are applying for a Figure loan for the first time, here’s a quick tip: include all your assets in your application. It could make a difference to your application outcome as well as the interest rate you’re offered.
What do lenders look for?
You may already know that lenders pore over your credit score, credit history, income, expenses, and debts when assessing your application for a loan or line of credit, but did you know these factors alone won’t provide a complete picture of your financial health?
While your credit report confirms how well you managed credit in the past, including the amount of credit that has been extended to you, how much of it you’ve utilized, and whether you were able to make on-time payments, lenders can’t assess your net worth from this information alone.
Your net worth is the difference between the total assets you have and the debts you owe. Net worth matters because it shows the amount of money you can get your hands on if you lose your income. Ultimately, how risky you are as a borrower isn’t just about your financial habits and your ability to earn money — it’s also determined by the assets you have and how easily they can be converted into cash in case things go wrong.
What assets can you include?
Put simply, an asset is an item you own with monetary value. Your monthly salary is considered income rather than an asset because money only comes in once you’ve earned it. However, the money you receive can become an asset if you invest it.
Here are different types of assets to consider for your loan application:
Cash and cash equivalents. Examples are notes and coins, the balance of your checking, savings, brokerage, or money market accounts, as well as certificates of deposits.
Liquid investments. These could be bonds, mutual funds, stocks, or similar investments that can be sold quickly in the financial markets.
Physical items. Tangible items like a vehicle, boat, property, jewelry, artwork, antiques, and furnishings can all be converted to cash, though some of these could take effort and time to sell.
Long-term investments. These are pensions, 401(k)s, IRAs, and other investments that are harder to tap into because they’re intended to be held for a long time. However, it may be possible to borrow from them or access them with some planning.
Your best asset is....
Although supporting your application with everything you own boosts your approval odds, not all your assets carry the same weight.
The best asset is liquid and easily accessible, which puts cash and equivalents on top of the list. Liquid investments like stocks are also highly ranked, as well as physical assets that can be sold in a reasonable time like a laptop, car, or jewelry.
Valuing your assets
It’s important to list your assets at their current market value because this tells you more accurately how much you’ll get from them if they need to be sold. While it’s straightforward to value assets like cash, shares, and bonds, determining the current market value of physical items like a boat or artwork is much harder. Online appraisal calculators offer a quick and convenient way to estimate an item’s worth, but it may be appropriate to hire a professional appraiser to examine your assets before estimating their value.
Your credit score
You can’t attach a monetary value to your credit score, yet it’s one of the most frequently used measures to assess your creditworthiness as an individual. The higher your credit score, the more you’re seen as financially trustworthy — and the more likely you’ll be extended credit with favorable lending terms.
That’s why it’s important to improve your credit score before applying for a new loan. You can do this by paying your debts and bills on time and in full. Your credit utilization — or the credit you’ve used relative to the amount you’ve been granted — accounts for 30% of your score, so it’s a good idea to avoid making big purchases on credit to keep your borrowing to a minimum.
Getting started with your loan from Figure
It’s important to take the time to build your credit and strengthen your asset position if you need to, but remember, arranging a loan shouldn’t be like pulling teeth. Figure offers easy application, great loan options, competitive interest rates, fast approval, and friendly customer service in one neat package, so you can get the loan experience you deserve.
