Anyone who has tried to get a personal loan knows the feeling of uncertainty that comes with submitting an application and waiting to hear back from the bank or lender.
Will they approve my application? Will they reject me? How long will I have to wait to find out? These are just some questions that might cross your mind when you’re in this situation.
Thankfully, you can do a few things that might help boost your chances of getting approved for a personal loan. To help you, we’ve outlined five tips below that will give you an idea of what to do when applying for a personal loan.
Find A Lender That Meets Your Needs
Before applying for personal loans, ensure you’ve identified a lender that meets your financial needs. Each lender has different lending requirements and guidelines. For example, one lender may not require a minimum credit score for approval, while another may only approve those with a 700+ score.
Working with the wrong lender will only set you back and may cost you more interest rates. As such, it’s essential to look for different lenders, compare their requirements, and find one that fits your needs. If a lender is unwilling to work with you or doesn’t offer competitive rates, then keep looking until you find one that does.
You’ll undoubtedly find a lender that meets your needs. But, when you do, get started on your application right away. The sooner you apply, the sooner you can start working toward getting approved for the loan.
Also, note that lenders in one state may have different requirements than those in another. For example, bad credit loans Hamilton will have different lending guidelines and requirements than in New York. As such, it’s essential to research and find a lender that meets your needs and is located in your area.
Review Your Credit Report And Improve Your Credit Score
Your credit report is a record of your financial history. Lenders use it to determine whether you’re likely to repay a loan and, if so, at what interest rate. Hence, you must review your credit report and check for any errors. Say, for example, you found that there’s an incorrect reporting of account status. In particular, closed accounts are reported as open.
You can dispute this error immediately to reverse its impact on your financial health. You can also find your credit score in your credit report. It’s a three-digit number that ranges from 300 to 850—the higher, the better—and lenders typically look for scores above 700.
If you have a low score, there are ways to improve it. For example, you can pay off your credit card debt, increase your credit limit, and ask for a higher line of credit with your current bank. While the process may take a long time, it’s worth doing if you want to boost your odds of getting approved for a loan
Rebalance Your Debts And Income
Another thing you can do to boost your odds is to balance out your debts and income. One of the biggest factors lenders look at when determining whether or not they’ll approve a personal loan application is how much debt you already have on other lines of credit.
For example, if you’ve maxed out on all your credit cards, it might be hard for a lender to see how you could repay another loan. You may need to supplement your income with additional work before applying for a personal loan.
Suppose you show that you’ve managed other lines of credit responsibly and have extra money left each month after paying off those debts. In that case, lenders will likely feel more comfortable extending credit to you.
Don’t Borrow More Than You Need
Requesting more than you need is a surefire way to decrease your chances of getting approved. For example, if you’re looking for a $20,000 personal loan but can only realistically afford a $10,000 loan, it’s better to ask for less.
A lender will be more likely to approve your application if they know you can make payments on time and that you have enough money left over after paying off your debt. So, only borrow what you need. Be honest about how much you can afford to pay back each month.
Apply With A Cosigner
A cosigner is usually a close friend or family member with a stable income and good credit score willing to vouch for you. Cosigning can make your chances of approval much higher and let you qualify for a lower rate. That’s a win-win for you and the lender.
Ensure that your cosigner knows what they’re signing up for, as they will be legally responsible for repaying your loan if you default. If you plan on using a cosigner, take extra care to make sure all of your information is accurate and up-to-date when you apply.
There’s no formula for success when applying for a personal loan. However, there are ways you can improve your odds of getting approved. By following these tips, you’ll put yourself in a better position to get that much-needed cash infusion.