Getting a Personal Loan Can Be Tough. It Does Not Have to Be
There is no universally applicable formula for securing approval for your personal loan application made to a bank or financial institution. Every bank has norms and requirements like your credit scores and income norms which vary from lender to lender; while some online lenders consider non-traditional data, like education levels or free cash flows. But all loaning establishments have one important thing which is common: they want their loan instalments paid back on time, so rest assured they only approve borrowers whose income streams meet their checks and requirements. Here are some tips to substantially increase your odds of qualifying for personal loans;
Spruce up your credit score
Needless to say, your credit scores matter a lot when trying to secure approvals for your personal loan application. The higher your score, the better are your loan approval chances. Cross-check your credit score reports for possible errors. A few of the usual errors that could pull down your credit score include closed accounts or wrong account information, often reported as incorrect credit limits, as per the information secured from the Consumer Financial Protection Bureau. You can generate free copies of your credit reports on an annual basis from websites such as AnnualCreditReport.com. If you notice any factual errors online, do dispute the case by presenting evidence online, over the phone or in writing.
Work hard to get those payments done which are due. If you’re not already, be very attentive about making regular monthly payments towards all debts incurred, returning more than the minimum amounts due whenever you can. This will be a great way of aiding your credit utilization ratio and payment history, which is your available credit (in percentage form), which you are currently utilizing. Together, these factors account for 65% of your unique FICO score. As a measure of abundant precaution, request them to increase your credit limit and call the customer relations phone numbers printed behind your credit cards to request an increase. If your income has risen after you obtained the card, then you have better chances of scoring a limit increase and if you have not missed any payments. But you have been warned, this strategy could backfire and even temporarily hurt the credit score if your credit limits are stretched too thin. So it would be prudent to ask your creditor beforehand, say experts.
Rebalance income and debts
Loan applications always seek to have you spell out your annual income, and you could include money you have earned from undertaking any kind of part-time work. You may want to think of a side-job to supplement your sources of incomes, or work to secure a raise at your present full-time job. Also, whenever you can, attempt to pay down your debt. Deliberate about selling any valuable liquid assets like bullion or stocks in taxable accounts and using proceeds toward repaying consumer debts which are generally high-interest and this should secure a greater rate of return as enhancing your income and slashing your debt, improving your ratio of debt-to-income, that is the percentage of all monthly debt expenses divided by your income earned monthly. All lenders do not have strict requirements, but on the whole, a lower ratio signifies to the creditor that your current debt is manageable and your are in control of it and more debt, when needed.
Never ask for more than you actually require
Asking for more money that overshoot your final financial goals is perceived as risky by most lenders. Review carefully the reason for asking the loan, tie this specific loan amount to your financial need which is immediate and pressing, and then only request for that amount. A bigger personal loan could possibly squeeze your budget, as ypu will have to make higher loan payments which will eventually affect your ability to pay for other pressing financial obligations, perhaps your mortgage payments or repayment of student loans.
Have you ever though about having a co-signer?
If your credit scores lie safely in the ‘fair’ range, having someone co-sign on your loan would give you better chances of faster approval. But this co-signer needs to have a better credit score than you and high income is preferred. This is because the co-signer assumes equal responsibility for repaying the loan, but it is necessary to co-sign with somebody who can afford to take the risk. You obviously intend to repay your loan, but you cannot predict factors and circumstances such as a job loss, or disability or any event that reduces your income and ability to make timely loan repayment. Having an honest chat with the prospective co-signer is essential for them to understand all risks before he or she agrees.
Finding the most suitable lender
Most of the lenders found online would disclose their basic requirements for annual incomes and credit scores and whether they are able to offer you options such as a co-signer. If you meet the lender’s minimum qualifications and wish to review estimated loan terms and rates, you should pre-qualify for financing. As is the case with most lenders, if you pre-qualify, you trigger a soft credit pull that has absolutely no influence on your final credit score.
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