How To Improve Your Chance To Get Approved for a Loan
How to go about getting a loan? Here’s how to increase your chances of getting a personal loan approved.
Getting denied by a lender when applying for a loan can be really damaging to your credit score. If your credit score has suffered, getting approved for a new personal loan can be even harder than before.
We have put together a list of ways to improve your chance of getting a personal loan approved, especially if your credit score is not perfect.
Improve Your Chances for a Personal Loan Approval
Improve Your Credit Score
Your loan approval will be significantly determined by your credit score. If your credit score is less than 600, you need to find ways to increase your score.
Lenders take a serious look at credit scores to assess whether or not you are capable of paying back debt. They view your credit score as a window into your ability to manage money.
Your credit score is made up of your:
- Credit history
- Debt to income ratio
- Payment history
- Credit diversification
- Credit frequency
These are keys to be aware of when trying to improve your credit score. The higher your score, the better your chances of getting a loan approval.
Want to improve your credit score? We have put together 8 actionable ways to do it – read it here.
Balance Your Income vs. Debt Ratio
When you apply for a loan, lenders will ask for proof of your annual income and often a breakdown of your debt. Your debt-to-income ratio is the percentage of your monthly debt payments divided by your monthly income.
Check to see if your income has increased since your last loan. If it has, then your debt-to-income ratio has changed. The lower your debt percentage, the better your chances of getting a personal loan.
Have a Plan for the Loan
Knowing how much you need to borrow once you are approved for a loan is essential. Having a plan of what the money is for will prohibit you from getting into an unnecessary debt cycle for things you do not need. It will also make looking for a loan easier, improving your chances of getting approved for a loan.
Keep your loan term as short as possible. Once you know how much you need to borrow, work out how long it will take you to pay back your loan.
Lenders prefer shorter payback periods as there is less chance that your circumstances will change. It also increases confidence with the lender that you will not fault your loan payments.
Consider a Cosigner
If you have relatively good credit and want a loan for a significant amount, consider a cosigner.
Cosigner loans can help when you need to consolidate your high-interest student loans or a business loan, or when applying for your first home mortgage.
If you have someone close that has good credit that trusts you to commit to the repayment of a loan, you may be able to get a much better interest rate. Banks and lenders are big fans of consigning, as there are now two incomes backing the one loan.
The consigner is basically the insurance than someone with good credit, and an income is going to pay this loan back. A cosigner increases your creditworthiness big time!
Obviously, there needs to be a disclaimer here that asking someone to cosign for you is a big deal. If you fault the loan payments, it is 100% on them to pay that loan back.
Get the Right Lender
If you have read any of our blogs, you will know that we at financer.com want you to find the best lender available. By that, we mean a credible lender that will lend you just enough money to get you where you need to be at a rate that is the most competitive possible.
- Credible lender
- Lending limits to suit your needs
- The lowest fees possible
Shop around and compare lenders through our online lending tool. The online lending industry has boomed, which means more competition. This is great for borrowers as interest rates, APRs and fees are always improving.
If you want even more significant loan amounts, consider going to see your bank or credit union. But make sure you compare their APRs with online lenders in your state as well.