5 Insider Tips for Securing Personal Loan Approval Every Time

Personal Loan 5 Factors You Must Evaluate
Get the Best Personal Loan 5 Factors You Must Evaluate

Every lender has their own set of criteria when it comes to approving personal loans. Factors such as your credit score and income will differ from lender to lender. Some may even consider nontraditional data like your education level or free cash flow. 

However, one thing is certain: all lenders want to ensure they will be paid back on time, so they will only approve borrowers who meet their specific requirements.

01. Clean up your credit

When applying for a personal loan, your credit score is crucial in determining your approval chances. Let’s go through some steps you can take to enhance your credit.

Check your credit reports for errors

Your credit score plays a significant role in your personal loan application. The higher your score, the better your approval chances. Review your credit reports from all three credit bureaus for any mistakes that could hurt your score.

Common errors include wrong accounts, closed accounts reported as open, and incorrect credit limits. AnnualCreditReport.com offers free credit reports once a week until the end of 2023. If you find any errors, dispute them online, in writing, or by phone with evidence to support your claim.

Stay on top of payments

Be vigilant in making monthly payments towards all your debts, and aim to pay more than the minimum when possible. It helps to improve your payment history and credit utilization ratio, which comprise 65% of a FICO credit score.

Request a credit limit increase

Give a call to the customer service numbers on the back of your credit cards. A good time to ask for an increase is when your income has gone up since you got the card, and you have a history of paying on time.

However, be aware that this strategy can temporarily hurt your credit score if it requires a hard inquiry, so be sure to ask the creditor beforehand.

02. Rebalance your debts and income

Loan applications will ask for your annual income, and you can include money earned from part-time work. Consider increasing your income by starting a side hustle or working toward a raise at your full-time job.

To further enhance your financial profile, make an effort to reduce your outstanding debts as much as possible. It can help you to achieve a better DTI ratio. Your DTI ratio calculates your total monthly debt payments divided by your monthly income.

03. Don’t ask for too much cash

Lenders consider requesting more money than you need as risky and may make it harder to get approved. A larger personal loan also squeezes your budget, as higher loan payments impact your ability to meet other financial obligations, such as student loans or mortgage payments.

Use a personal loan calculator to estimate your potential monthly payment on a personal loan based on your desired loan amount and repayment term.

04. Consider a co-signer for Personal Loan Approval

If you find yourself in need of a loan but have a not so excellent credit score? Fear not, and there are options available to you. One such option is adding a co-signer to your loan application. A co-signer can help increase your chances of getting approved for the loan. Here are some things to keep in mind:

  • A co-signer with a higher credit score and income can improve your chances of approval.
  • The co-signer will be equally responsible for repaying the loan, so choosing someone who can afford the risk is crucial.
  • Talk to your potential co-signer and explain the risks involved. They should understand that they’ll be responsible for paying the loan if you can’t, even due to unforeseen circumstances like a job loss or disability.
  • Ensure your co-signer is fully aware of their obligations before agreeing to co-sign the loan.
  • A co-signer can increase your chances of getting approved for a personal loan if they have a good credit score and a solid income. A co-signer will also share responsibility for repaying the loan. So, ensure you can afford the monthly payments before asking someone to co-sign your loan.

05. Find the right lender

Given the varying requirements of different lenders, securing a personal loan can be daunting. One of the keys to success is identifying a lender that aligns with your credit score, income, and DTI ratio. A thorough comparison of lenders is essential to ensure that you find the right fit.

Start by comparing lenders’ rates, fees, and repayment terms to find the best match for your financial situation. Make sure you check if the lender performs a hard inquiry on your credit report, as this can temporarily lower your credit score.

It’s crucial to stay vigilant against potential scams. Protect yourself and your finances by learning to identify and avoid fraudulent loan offers. Our articles “Personal Loan Scams” and “Methods to Identify a Loan Scam” cover this topic extensively and offer valuable tips to help you stay safe. Don’t let scammers take advantage of you – make sure to read our articles before applying for any personal loan.

Conclusion

In conclusion, obtaining a personal loan is a process that requires careful consideration and planning. Every lender has a unique set of criteria when it comes to approving personal loans, and factors such as your credit score and income will differ from lender to lender. Therefore, taking proactive steps to improve your credit score and financial profile is crucial, including checking your credit reports for errors, staying on top of payments, and rebalancing your debts and income.

When applying for a personal loan, requesting more money than you need can be considered risky and make it harder to get approved. It’s essential to consider your budget and how much you can realistically afford to repay each month. Additionally, adding a co-signer to your loan application can help improve your chances of approval. Still, it is crucial to choose someone with a good credit score and income and understand their obligations.

Finally, finding the right lender is crucial in securing a personal loan. You must identify a lender that aligns with your credit score, income, and debt-to-income ratio. You can find the best match for your financial situation by comparing lenders’ rates, fees, and repayment terms. Remember that some lenders may perform a hard inquiry on your credit report, which can temporarily lower your credit score, so be sure to check before applying.

Frequently Asked Questions and Answers (FAQs)

How important is my credit score when applying for a personal loan?

Your credit score plays a significant role in your personal loan application. The higher your score, the better your approval chances.

How can I improve my credit score before applying for a personal loan?

You can improve your credit score by checking your credit reports for errors, making timely payments, and requesting a credit limit increase.

How can I improve my chances of getting approved for a personal loan?

You can increase your chances of getting approved for a personal loan by rebalancing your debts and income, not asking for too much cash, and considering a co-signer.

How do I choose the right lender for my personal loan?

The key to success is identifying a lender that aligns with your credit score, income, and DTI ratio. A thorough comparison of lenders is essential to ensure that you find the right fit.

What should I look for when comparing lenders for my personal loan?

When comparing lenders, you should consider their rates, fees, and repayment terms. Make sure you check if the lender performs a hard inquiry on your credit report, as this can temporarily lower your credit score.

How much money should I request when applying for a personal loan?

Request only the amount of money that you need. Lenders consider requesting more money than you need as risky and may make it harder to get approved.

Should I consider a co-signer for my personal loan?

If you have a less-than-stellar credit score, consider adding a co-signer to your loan application. A co-signer with a higher credit score and income can improve your chances of approval. However, the co-signer will be equally responsible for repaying the loan, so choosing someone who can afford the risk is crucial.

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