The best way of protecting yourself against getting your personal loan rejected is knowing what it entails to get a lender to approve your loan. Here are 7 ways to increase your chances of being approved for a personal loan.
1. Check credit requirement
When applying for an unsecured personal loan, the primary factor lenders consider is your credit. Every loan has its bare minimum one should meet to qualify
But not every lender needs you to have excellent credit. There are circumstances where you may have an excellent credit rating, but if you have not met the requirements the lender wants, you’ll most likely get rejected outright. Before applying, ask the lender if you are not sure if your history or credit score qualifies.
2. Check the minimum income requirements
Most lenders have an income requirement that must be met. The lender’s website may not list it, so you will have to do some research either browsing the review pages or contacting the lender directly.
Just like credit, this one thing most lenders deem to be essential. After all, if you can’t pay it back, how can you borrow something you can’t pay back?
3. Meet the employment requirement
Generally, lenders will consider income from different sources, but not all the time. There are times when benefits, freelance work or child support payments just will not cut it.
Some lenders require you to be under the employment bracket for a given number of years, or that your income is received through direct deposits.
4. Have sufficient collateral
To borrow some loans, especially from banks, you will be required to provide some sort of collateral. This can either be in form property, source of liquid money that the lender can acquire in the event you default.
If you’re a defaulter, you will for sure lose your collateral. It lowers the lender’s risk and helps you qualify or get better terms and rates. You can understand more about how you can protect your collateral from Stoneroselaw.com
5. Limit your outstanding debt
Just like income, your debt-to-income (DTI) ratio measures how much you can borrow. This shows lenders you pay your loan every month and that when it comes to money, you are responsible.
A high DTI shows that you are using too much of your money paying off loans. So if you have a DTI of over 43%, you may want to consider paying off your debts first before anything else.
6. Make sure purpose of your loan is allowed
Personal loans are open, and just that, personal, and so can be used for a variety of things, but some lenders won’t allow a loan used for everything. For instance, you may be denied using the loan funds for your business or secondary education fees. Consult with your lender to ensure you apply for exactly what you want.
7. Verify your details
Personal finance company Pronto Finance reminds “even the smallest details missed could mean rejection.If your details can’t be verified, the lender is unlikely to give you a loan. They suggest, “double-check your application before hitting submit.”
