Education Center

What should I know before borrowing money?

When you know what lenders are looking for and how to improve your ability to borrow, you can make the best financial choice for your situation.

What lenders are looking for

When you apply for a loan, lenders generally look at the five Cs:

  • Credit history – This includes your credit score, how long you've had credit, and whether you pay your bills on time.
  • Capacity – Your capacity is your ability to make payments on the loan. Lenders will review your employment, income, and debt-to-income ratio—that's your monthly bills divided by your gross income.
  • Capital – This is the amount you've put down toward the purchase. It also covers the funds you have in your safety net—your total assets such as savings, stock and investments.
  • Collateral – To secure credit for an auto loan, your collateral is your car. For a mortgage, it's your house. If you default on your loan, your lender can assume ownership of the collateral.
  • Conditions – These can include your plans for the loan, economic conditions, and co-signers or guarantors.

What you need to apply

  • ID – You'll need your Social Security card and a government-issued ID.
  • Proof of income – You'll need a recent payroll stub or a W-2 tax form.
  • Employment and tax return information – If you're applying for a mortgage or personal loan, you'll need to supply 1 to 2 years of your federal tax returns.
  • Financial statements – For mortgages and other large loans, lenders will require you to supply copies of your banking and investment account statements.

With these basic items taken care of, you'll be ready to get started.

What you can do to improve your ability to borrow

  • Pay your bills on time – Don't make late payments, because they’ll stand out in your credit history.
  • Check your credit score and correct any errors – If any of your information is incorrect, the credit agencies will need to amend your report.
  • Pay off smaller debts first – This will improve your payment history and increase your debt-to-income ratio.
  • Build up your savings – This will give your financial balance sheet a boost and give you an important financial safety net.
  • Don't over-apply for credit – Each time you apply for credit, your credit score will go down for a short time. If you apply for several loans within a few months, your credit score will be impacted.

Where you can check your credit score

You can obtain a free credit report once a year from AnnualCreditReport.com (opens in a new tab).

The bottom line

Be a smart shopper and never rush into a major financial decision. Find the best loan and interest rate for your situation. Ultimately, you can save money and avoid last-minute surprises by being well prepared.

Related topics

Understanding your credit report

We'll help you cut through the clutter and obtain valuable—and often free—information about your credit.

Tips for first-time credit card users

It's the perfect time to educate yourself in the ways of responsible credit card use.

How do I build credit?

Establishing credit is the first step toward future life purchases such as a house or car.

The importance of a budget

Learn how to create a sensible budget that fits your needs.

The information provided is not intended to be legal, tax, or financial advice. BB&T cannot guarantee that it is accurate, up to date, or appropriate for your situation. You should consult with a qualified attorney or financial advisor to understand how the law applies to your particular circumstances or for financial information specific to your personal or business situation.

Branch Banking and Trust Company is a Member FDIC and an Equal Housing Lender. Equal Housing Lender icon