A checklist to get a new loan.

If you are thinking about a new loan, there are several things that you should do in order to get the best rate and terms. If you are in need of an emergency loan, you may not be able to get these things done, but if you have the time, this is what you need to do.

Run Your Credit

First and foremost, you need to see where you stand credit wise before getting a loan. If you have no idea what your score looks like, you will be at the mercy of the lender. They may tell you that your credit is worse than it is and try to coerce you into taking worse loan terms.

Checking your credit and getting your score is super easy these days. Just use a free service from Credit Sesame or Credit Karma. They might advertise to yo ua bit but the service is free, so deal with it.

Once you have your credit in front of you, you can see what you need to do to improve your score.

Obviously, the first thing that you should do is dispute any errors. Simply find the errors and write the credit bureau stating your dispute. You need some time to get this done before taking out a loan because the bureau will have 30 days to investigate the matter. Do this 60 to 90 days in advance so that there is time to investigate and get the reports updated before you look for new credit.

Next, take a look at your balances as a whole and see where you stand. You want the amount of credit that you are using to be under 30 percent if possible. That will give you a better score. Under 10 percent is even better.

Now Pay Down Your Debt

Now that you have an idea of what your debt picture looks like, you can work on paying those balances down. Ideally you want to at least be under 30 percent but if you are closed to being maxed out, do not panic. As you pay down your debt, your score will increase incrementally, it is not an all or nothing thing.

If paying down your balances seems like it is going to take too long, try another approach. See if you can get credit line increases. Contact your creditors and ask for an increase. They can usually get you one without even running a hard credit check. More available credit will mean that you are using less of it percentage wise and that will help your score.

Keep in mind that it could take about 60 days for changes to show on your score, so get this done ASAP.

Get Your Documents Together

The documents that you need will depend on what kind of loan you are thinking of taking out.

For an auto loan, you might need proof of car insurance, pay stubs and possibly even a few months of bank records. Better to get this stuff together ahead of time so that you are prepared.

Update Your Budget

When you apply for a loan, your lender will take a quick look at your finances and obligations to determine how much they think you can afford. They will then grant you a certain amount of credit. This is not always accurate.

You might actually get approved for more than you can afford. It is up to you to update your budget and then fit a potential loan payment into it. When you do, look to see if you will have enough money to cover your other expenses, hopefully with a bit of cushion.

Use your updated budget to guide you when taking out a loan. Do not bite off more than you can financially chew.

Get Your Down Payment Together

If you are looking for an auto or home loan, your down payment will be critical. In both cases, the more you put down the better.

More money down on car and home loans will typically get you a better interest rate because you pose less of a risk to a lender. In the case of a home loan, more money down could even get you out of paying mortgage insurance if you can handle a 20% down payment.

In any case, get your down payment together and be prepared to prove where you got it.

Get Your Loan

Now that you have things in order, it is time to get your loan. Just be sure to shop it around a bit. Don’t worry about multiple inquiries. In general, creditors now that you will shop your loan so multiple credit hits in a short time generally just count as one.