Top Methods In Getting A Loan Approved
As much as we would love for there to be a step-by-step guide styled way on how you can improve your chances at getting a loan approved. There is no universal way to do it, even with easy to apply loans.
Requirements for borrowing will vary per lender, including credit score and income. And some online lenders will even consider data that is nontraditional, such a level of education or free cash.
However, lenders will usually always have a few things in common, one of these being that they all always want to be paid back on time, so they will only approve borrowers who meet their requirements to show them they can do this.
6 Methods In Getting A Loan Approved
So, while there are no universal rules, here are some tips on how you can prove to lenders that you will be able to pay them back on time.
1. Clean Your Credit Score
The absolute first thing that you can do to make yourself more attractive to lenders is to give your credit score a makeover. Credit scores factor in majorly on personal loan applications, and on most financial applications, and the higher the score is the more attractive you will be to lenders.
So always check your credit reports for any errors, common errors can include closed accounts reported as open, incorrect limits, wrong accounts, and so on. These can all harm your score.
You should also be sure to get on top of payments, if you are not already doing so, always be very vigilant when it comes to monthly payments towards debts, try to pay above the minimum when you can.
Doing this benefits credit utilization ratio and helps your payment history. Overall doing these two things will make up a massive 65% of your FICO score! So, pay attention to them!
You can also request a limit increase, calling up the numbers on the back of your credit cards and asking them to provide you with an increase. If your income has risen since you got the credit card and have not missed a payment, you will have a better chance.
2. Balance Income Vs Debts
Loan applications will also like to see your income annually, you can include part-time money earned as well. Taking on a side hustle or working towards a raise can help you to increase your income. While not always easy, it can really help.
If you boost your income, and lower debt, this improves your ratio of debt-to-income, which is the overall percentage of your monthly debt payments that can be divided by monthly income.
Note that not every lender will have a strict requirement when it comes to debt to income ratios, but if you have a lower ratio it will show that you have your debt under control, can take on more, and are a financially responsible person!
3. Ask For Less, Not More
Asking for too much when you apply for a loan is always a bad call, asking for more than you need is always seen as a risk from a lender’s point of view, and it can actually hinder approval ratings.
Asking for a large personal loan will also put pressure on your budget too! Higher loan payments can have an effect on your ability to meet financial obligations outside of the loan, this includes things such as mortgage payments or student loan repayments.
You should use loan calculators to get an estimate on any potential monthly payments on personal loans, basking this on your desired repayment terms and the amount of your loan.
Most would prefer to not have a cosigner, however, they can be useful for many people. They are especially useful if your credit is not excellent or good. Adding a co-signer with a strong credit score and good income can absolutely skyrocket your chance of being approved.
As a co-signer is responsible for repaying the loan as much as you are, it is very important that you get a co-signer who is actually able to afford the risk of doing so.
You could have absolutely every intention of repaying the loan, but you can never predict unemployment, disability, or any other emergency which could shake up your world, impact your income, and thus, your ability to repay your loans.
Always be sure to have an honest conversation with whoever your prospective co-signer is so that they can have a full understanding of the risks of co-signing the loan with you before they agree to do so. For both your sake and their own.
5. The Right Lender Works Wonders
One of the most important parts of getting a loan approval is to find the right lender for you.
A vast majority of lenders online will disclose their minimum requirements for credit scores, as well as annual income and if they accept co-signing on loans.
If you meet the minimum requirements of a lender, and you want to see what their estimated terms and rates are for your loan, then you could pre-qualify for a personal loan.
A majority of lenders will do a soft credit check for pre-qualification, which will not have any impact on your credit score. Pre-qualification done through many lenders, with a comparison on terms and rates can help you find what will work best for you.
The best lender will have payments and costs that fit into your budget. Doing this is also a critical aspect of getting a loan that does not worsen your financial situation and end up forcing you into a spiral of debt.
6. Think Before You Act
Finally, think before you act, all of these options mean you need to think before you choose. Finding the best loan is critical, not just the right lender, but choosing the right TYPE of loan is also important.
Consider all of your options before you fork out for a loan, there may be a better option for you, so you should always try to shop around for your options before you set anything in stone.