Taking out a loan nowadays has been a financial choice by many. Whether you are taking out a loan for business improvement, getting a brand new car, or applying for a personal loan as a backup financial source. And undeniably, a personal loan is a more versatile and flexible type of loan since it doesn’t require a concrete reason to apply for one.
But how high is your approval rate in getting your application approved by your prospect lender? We understand that getting denied or rejected by a lender is not something you would like to happen. So, we have come up with a list that can help you boost your approval odds in applying for a personal loan.
Read the article and familiarize yourself with the list as it can play a significant factor the moment you signed up for a personal loan in the future.
How to Get Your Personal Loan Application Approved
1. Improving Your Credit Score
There are many ways to improve your credit score. However, there are top factors that you should settle and handle with care and thoroughly to have your personal loan approved in no time.
Paying your debts
You might have taken out many installment loans, and unfortunately, everything is stacked up; thus, paying all of them is a burden. And thinking of taking out a personal loan to consolidate debt will be helpful.
Technically, taking out a personal loan to pay off consolidated debt should be useful. However, you also need to try paying them off above the minimum just enough to improve your credit score.
Few lenders consider DTI or Debt-to-Income ratio as a playing factor in getting your personal loan approved. Yet, it is still important to balance this ratio out to prove that you can even handle an additional debt in your pocket.
Check for errors and mistakes
Though it is rare to have some errors and mistakes in a credit report, it is your responsibility to check this type of record at least once a year, even if you don’t have an intention in applying for a loan. The common mistakes in a credit report are wrong accounts, closed accounts that are still reported as open, and not updated credit limits. All of these mistakes will hurt your credit score, and you should go over them thoroughly.
2. Increase Your Income
There are several ways how you can increase your income. You could either get a better paying or a second job, or start your own small side hustle-business. I know many of you might be wondering, how could I apply for a second job, if I’m already working full-time? Actually, it’s pretty easy to find yourself a suitable internet job you can do online. There are tens, if not hundreds, of thousands of companies trying to hire a part-time freelancer to help me out.
3. Choosing a Lender
The choice of picking up with a lending company to work with is a personal preference, and sometimes, it becomes very personal to the borrower. The feeling of trust that a borrower feels towards a prospect lender plays a factor since he/she needs to be completely confident and comfortable engaging a transaction with the company. Thus, being thorough in looking for one is a requirement.
Look for legitimacy
Looking for a legitimate lending company should be your priority. There are many lending companies out there, whether in online or has physical establishments like banks and private financial companies. Whenever you have spotted a lender that mentions a bad credit personal loans with guaranteed approval and no credit check, that’s already a red flag that you should be wary of.
Moreover, a legitimate lending company never promises or guarantees instant approval without conducting a credit history review. Spotting this kind of advertisement or promotion is something you should avoid right away. It might sound convincing since it promises hassle-free transactions, but you’ll get roped in a potential personal loan scam you might not even know. Hence, be very vigilant.
Work with a specific lender type
Since there are already different types of lenders available such as banks, credit unions, online lenders, and payday lenders, determining what kind of lender you want to work with will also help you get fast approval.
- Banks. If you are already engaged with many transactions in a particular bank, applying for a personal loan in the bank will give you a smoother process plus a lower and competitive interest rate that works for you.
- Online lenders. There are many online lenders now that offer an easy-to-apply process, and they offer reasonable rates in their online loans with monthly payments. Taking out a personal loan with a credible online lender is a good choice as well.
- Credit Union. Like working with banks, if you are a member of a particular credit union, there is a high percentage in getting your application approved. But if you are not a member, you might opt to see the next in the list below.
4. Consider a Consignee
If you are still interested in applying for a personal loan in a specific credit union, you have found that you see them as approachable to transact with. Try looking for a friend that could be your consignee — having a consignee grants you another point to have your application approved.
Also, if your lender sees that you have a consignee that has a stronger credit limit in his/her report, that could reduce the risk factor.
But it is critical looking for a consignee, that is why it is essential to be honest when you found one. And ensure that individual that you have the full intention in repaying your loan on time.
5. Never Ask For Too Much
The golden rule here is to never take out a loan that’s beyond your paying capability. Always look for a valid reason why you are taking out a loan. A compelling reason also plays a factor with your lender. Asking for too much cash is a financial obligation, ask what is enough and sufficient for you.
Applying for a personal loan has many benefits and advantages for an individual. The loan amount that will be granted can already finance a good startup business or have your dream vacation a reality. Yet, there are odds that you need to win, especially in getting your application approved.
All in all, you just need to be thorough and diligent with the application process and, hopefully, have your application approved.