- November 6, 2020
Tips to Increase the Chances of Personal Loan Approval
Personal loans involve a lengthy process of approval that can take from weeks to months. In case of an emergency, a rejection can be a serious setback. Therefore, the borrower makes every effort to make sure the loan gets approved.
If you are also facing some financial trouble, here are some tips to increase the chances of personal loan approval.
Increase Your Credit Ratings
The credit score is an important factor that decides the eligibility for a personal loan. Try not to get any negative marks on it with defaults or missed payments. Ask the lenders for a repayment holiday if you cannot make payments. A single default can make the lender reject your application.
Check the Report for Mistakes
Many credit reports sometimes have errors that lead to loan rejection. It is recommended you check your credit rating 30 days before applying for the loan. If you find some mistake, make sure it gets removed.
Keep Liabilities Low
Your credit score is affected by the credit utilization ratio. It is the amount you took of credit relative to the available credit amount. Therefore, you must pay off the debts as much as possible. Also, try to refrain from using a credit card to keep its balance low.
Do Not Apply Too Much for Loan
A few applications for new credit cards and loans will not affect the credit rating much. However, way too many applications can create a significant impact on the rating. Therefore, make sure you are eligible for the loan before applying for it. And do not go all ablaze with the loan applications and only apply one place at a time.
A Steady Income is Important
Your income is an important factor to determine your ability to repay the loan. Apart from a steady income over the last few months, a reliable source is also recommended for approval.
Do not change jobs a few months before the loan application. Any drop in income will increase the difficulty for you. You must represent yourself as a responsible buyer with enough income to repay the loan.
Compare Different Lenders
A little research on the internet is recommended to check the offers from different lenders. Interest rates and terms are not the same from every lender. Therefore, make your decision after checking the eligibility and interest rates.
There are financial institutions that offer loans to people with bad credit ratings. On the other hand, some are quite selective with their borrowers. You can also read the reviews from other customers to know about the nature of the lender.
Apply for the Right Amount
It hardly makes any sense to apply for a loan amount larger than what is required. The overall cost will increase drastically with fees and interest. The repayment will get more difficult with heavier installments.
The risk involved with a heavier loan amount is another factor that affects the approval.
- Lenders will be at risk of losing more money.
- It makes the small amounts easier to get approval.
- Many lenders offer fast loans with no guarantor required for these small loans.
Select Shorter Repayment Time
Long-term loans come with the prospect of smaller installments. But the interest rate paid over a longer period will cost you more than a short-term loan. Therefore, a short-term loan is a better alternative for your finances.
Long-term loans are less likely to get approved when compared to a small-terms loan. For banks, the risk of something wrong with the repayment increases with an increase in the loan duration. Try to choose the shortest time possible considering your finances and installments for maximum chances of approval.
Find a Guarantor
Guarantor loans are ideal for people who don’t qualify to get a personal loan. If the person has a good credit rating and steady income, the chances are increased exponentially. For banks, the risk is low since there are two parties liable to repay the loan.
However, the guarantor now shares the risk alongside you. Any default on your side makes him liable to repay the loan. You should only consider this option if you are sure to repay the loan amount on time. To conclude, a steady income with a good credit rating is enough for personal loan approval in the majority of the cases. Just make sure there is no error in the credit rating, and the key factors are intact a few months before the loan application.