Oftentimes, we consider applying for a personal loan because we are badly in need of extra cash. This is why it gets pretty upsetting if we are rejected.
Do you want to increase your chances of getting an approval for a loan this 2019?
The best way to avoid rejection is to know exactly what it takes to be approved by most lending companies.
Here are some clever tips you need to know to help you get approved for a loan:
- Know what the minimum credit requirement is.
Your credit score is the most important factor for a loan approval, especially if you’re applying for a personal loan. You have to find out what your score is to determine whether you can get approved for a loan or not.
Your credit report will tell lenders how responsible you are as a creditor. A lot of lending companies only require a median score of 670 to 739. You can request a copy of your credit rating from three major credit reporting agencies, Equifax, TransUnion, and Experian.
- Find out about the minimum income requirement.
Aside from credit reports, a lot of lenders will require a minimum income for loan applicants. They have to know whether you have the capacity to pay back the debt or not. Check with different lenders to know which one will give you a better chance of personal loan approval.
- Check if they have an employment requirement.
Nowadays, some lending companies may only approve loans for specific income sources. There are lenders that may not approve loans for freelance or work-from-home workers. Others may also require applicants to have been employed by a company for a certain number of years.
- Choose the lender carefully.
There are many financial sources that offer personal loans, like banks, online lenders, and credit unions. Each of them offer different interest rates and terms. But generally, credit unions and online lenders offer lower interest rates than banks. This is why it’s important that you choose the best lender for your needs.
- Careful with lenders that offer credit card consolidation.
One of the most popular reasons people take out a personal loan is to pay off credit card debts. There are lenders that offer to consolidate all your credit card debts into one single loan. Be extra careful when choosing where to take a personal loan from. Make sure that you won’t be racking up new debt once you’ve paid off all your old credit cards.
- Be ready with sufficient collateral.
Personal loans are usually unsecured, which means that banks or credit unions won’t require you to have collateral. But because this increases the risk lenders face, you may not have a lot of options when it comes to interest rates.
It’s best to choose a lender that offers secured personal loans. But to be qualified, be sure to have sufficient collateral, like a piece of property or anything that the financial institution can use should you default on your loan.
- Verify all the terms.
Before you sign a loan deal, you need to ask for a full disclosure of the loan terms. Make sure to check the monthly payment and repayment terms. See to it that these work in your best interest. You should also ask about fees for late payments, prepayments, and penalties in case you pay off your loan before the term ends.
- Gauge your financial situation.
How much can you actually afford to pay every month?
Depending on your credit score and income, there will be lending agencies that will offer you a bigger loan amount. This can be tempting. But you could end up biting off more than you can comfortably chew. Be careful not to take out a personal loan that is beyond your capacity to pay. Otherwise, you can fall into a debt trap that’s difficult to get out of.
- Shop around for payment protection insurance.
Since lenders offer credit protection insurance, you might think that it’s best to go for it so you don’t have to waste any time searching for a company that offers this product. Actually, there are other places where you can get a better loan repayment insurance deal.
- Find out if you can opt out of an automatic debt payment arrangement.
Lending firms may set up their loan terms as such because it’s easier for them to get the monthly payments that way. But this could leave you with no money when you need it most.
If you don’t want your creditor to automatically withdraw from your bank every month, find out if they accept other modes of payment. Also, check whether they have a fee for other payment options, like by check or cash.
It’s a lender’s discretion whether to approve or reject your personal loan application. But it would be wise to make sure that you are well prepared before you set out to find the best lending company for your needs.