There is no formula to get approved for a personal loan since the requirements vary from lender to lender, and some may even require you to show your education level. Nonetheless, all personal loan lenders share a common desire, which is for borrowers to repay their loan on time, and therefore, they will only give you the loan if you meet their specific requirements.
Whether it is taking your dream vacation or debt consolidation, a personal loan is an ideal funding option to make that happen. However, getting approved for a personal loan by financial institutions can be challenging for many individuals. That’s why we have curated this post to show you important tips to help you get your loan approved without a hitch. These tips will increase your chances of getting a loan.
Tip 1# Make Sure You Are Eligible
Lenders consider a credit score when giving out a personal loan. Having a high score can improve your chance of approval. Credit scores of 750 and above are good.
Though you can get a low CIBIL score loan, you need to improve it. Start by paying off your monthly installments and any pending bills on your credit card on time. You also need to diversify your credit portfolio and also reduce your debt-to-income ratio considerably. Also, make sure your credit utilization ratio is reduced and shouldn’t be above 30%.
Tip 3# Check Your Report for Errors
Your score determines whether or not you will be given a loan. Additionally, it is very critical in determining the interest rates charged, among many other things. Therefore, you should make sure that there are no errors on your report, as it greatly influences your credit.
To increase your chances of getting approved for a loan, check your credit history before you apply. You can check your report at the Annual Credit Report website. In case of errors, you need to contact the reporting agencies to update it.
Tip 4# Pay Other Debts Before Borrowing for More
Lenders will always look at the DTI ratio, which means they’ll look at the amount of debt you currently have, the total you’ll have after getting the new loan, and your income. After scrutiny and they find the total debt is more than the income you are earning, your loan application will be rejected.
Therefore, paying down some of your debts before applying for a personal loan will lower the DTI ratio, thus improving your approval chances. Paying down the debt also helps in improving your score. Therefore, make an effort to lower the current balances. This way, you will be killing two birds with one stone.
Tip 5# Use a Consigner
Most lenders allow borrowers to use consigners when applying for a personal loan. A consigner is basically a person who agrees to repay the loan if you fail to do so. Suppose you can get a family member or a friend to act as a cosigner, the better. However, they must have more income or a good credit history and be willing to act as a consigner. This will help you borrow a loan at a better rate.
Tip 6# Gather the Required Documentation
It is also important to collect all necessary documentation beforehand to smoothen the application process. Lenders usually need proof of income, identity, address, bank statements, and employment history. Having all the required documents will help you have a smooth application process. Still, some lenders offer loan without documents which means you can avail a personal loan with minimal documentation.
Tip 7# Provide Accurate Information
While applying for a loan, it is important to give accurate and updated details. In case of discrepancies or information that misleads the lender, your application will be rejected. Ensure you double check the details and make sure it is correct before applying.
Tip 8# Choose the Lender Carefully
Before settling for a lender, do a thorough research in the market. Even though you may be in need of funds, do not settle for the lender you find first. There are many financial players flooded in the market with good lending conditions. You need to do a thorough check to make sure that you don’t miss out on available offers.
That’s all on how to get a personal loan approved. Knowing the lender’s loan requirements, regularly checking your credit reports, raising your score, and giving correct information pertaining to the personal loan application will certainly help with personal loan approval. Make sure to evaluate the terms and compare different lenders to make an informed decision.