Every year, approximately one-third of Americans (that works out to more than 80 million people) take out personal loans.
Are you considering applying for a personal loan to help you through a difficult financial time?
It’s easy to feel overwhelmed when applying for a loan, especially if it’s your first time or if you’ve had an application denied in the past.
If you want to ensure you get your application for a personal loan approved, keep reading. Listed below are 10 must-follow steps that will help you increase your chances of approval.
1. Check Your Credit Report
One of the first things you ought to do if you’re considering taking out a personal loan is to look at your credit report. Getting a copy of your credit report (you’re entitled to a free copy each year) will help you get a thorough understanding of your financial situation.
In addition to learning your credit score, you’ll also be able to check your report for errors that might be bringing that score down. If you notice any of these errors, get them corrected before you apply for a loan.
2. Compare a Variety of Loans
Before you start applying for personal loans, it’s a good idea to shop around and see what different lenders have to offer. There are lots of online tools that make it easier for you to compare personal loans from various lenders.
This allows you to see which lender has the best interest rates and the lowest fees. You can also look at other aspects of the loan and the lender, specifically, to see which one seems like the best fit for you.
3. Get Pre-Qualified
If you get pre-qualified for a loan, you’ll have a better idea of how much money you’ll be able to get from a lender.
This, in turn, can help you to budget accordingly and determine whether you’ll be able to meet your financial obligations with the money the lender has to offer you.
Pre-qualification only requires a soft credit check, too. This means your credit score won’t be dinged the way it would be if you were to fill out applications for various loans.
4. Assess Your Budget
When you’re applying for a loan, it’s important to think about more than just how much money you need. You also need to think about your ability to pay that loan back.
Take a look at your budget and consider how much money you can afford to spend repaying the loan each month. Avoid taking out more than you can afford, even if a lender offers it to you.
5. Don’t Fill Out Too Many Applications
If you apply for too many loans at once, your credit score will take a hit.
Applying for a lot of loans at one time is also a red flag to lenders. It implies that you’re desperate for money, and people who are desperate for money usually don’t do a very good job of paying their loans back on time.
Lenders may see you as a risk and be wary of approving your application.
6. Consider Alternative Lenders
For those who are unlikely to have their loan application approved by a traditional bank or credit union, alternative lenders are a good option to consider.
Alternative lenders like online banks and peer-to-peer lending sites can provide you with more opportunities to get the money you need. They sometimes have better interest rates and loan terms, too.
7. Pay Down Your Existing Debts
This might be the last thing you want to do when you’re in a tight financial position and are looking for a loan to help you cover your expenses.
If you take the time to pay down your existing debts before taking out a loan, though, your credit score will increase and you’ll be more likely to get approved for a larger amount.
8. Consider a Co-Signer
If you have a low credit score or no credit score at all, it can be hard to get approved for a personal loan. If you have a co-signer, though, the lender can use their credit score instead of yours. This, in turn, will increase your chances of getting approved.
Having a co-signer will also make you eligible for larger loan amounts and better loan terms. If you pay the loan back on time, you’ll also be able to bolster your own credit score.
9. Have Essential Documents Ready to Go
There are quite a few different documents you’ll need to have at the ready when applying for a personal loan. This includes bank statements, tax returns, and employment records.
According to Bonsai Finance, if you can meet these basic requirements and have your documents ready to go, you’ll be able to expedite the process and be more likely to get approved for any type of personal loan, even a bad credit loan.
10. Talk to Your Lender In-Person
Sometimes, you have extenuating circumstances that make it harder for you to get approved for a loan. It could be a credit issue, a repayment issue, or something else altogether.
If you’re in a bind and really need money, it can be helpful to talk to the lender with whom you’re working in-person or over the phone.
Communicating with them in a more personal way can help them to learn more about your situation. When they know more about you, they’re sometimes more willing to approve an application that they would have otherwise denied.
Reaching out in-person or over the phone isn’t going to hurt your chances of approval, so it’s worth trying.
Get Your Loan Approved Today
The process of applying for a personal loan can be overwhelming, especially when you have a subpar credit score or aren’t confident in your chances of having that application approved.
The good news, though, is that you can increase your chances of getting your loan approved quite a bit with the right strategy.
If you keep these tips in mind, you’ll have a much easier time navigating the application process, and you’ll be more likely to qualify for the money you need.
Do you want to learn more about loan applications or finance in general? If so, be sure to check out the Money section of our site today.