When you find yourself in a financial bind, you may need to apply for a personal loan. The following tips will help your chances of being approved. It should be noted that there is no guarantee that you will be approved for any loan you apply for, even for quick unsecured personal loans.
Know Your Credit Score
One of the most important factors for getting a loan is your credit score, especially when the loan is unsecured. Each loan type has a minimum for qualification, although some lenders do not require a high score. Even if you have excellent credit, your application will be rejected if your score is not high enough for the lender. The best approach is to ask the lender if your credit history qualifies before starting the application process.
Know the Income Requirement
Aside from a minimum credit score, you will likely run into an income requirement. The tricky part about this is you may have to do some research to find out what that number is because it may not be clearly posted on the website. Check reviews of the lender or call and ask directly about income. This point is important because you cannot borrow money without the means to pay it back.
Know the Employment Requirement
While lenders will typically consider different types of income, it is possible to be rejected if you are receiving benefits, working as a freelancer or getting child support. There may be a length of employment requirement or a stipulation that you are paid via direct deposit.
Provide Enough Collateral
If you apply for a bank loan, you will need to have collateral. This can be your car, your house or a liquid asset that will be taken by the lender if you do not repay the loan. This is risky for you, but it lowers the lender’s risk and can help you get approved. You may also get better terms and interest rates with a collateral loan.
Reduce Your Debt
Lenders will look at your debt-to-income (DTI) ratio, which will determine the amount that you borrow. A low DTI is an indication that you are financially responsible, and you will likely pay back your loan. If your DTI is high, it means you are putting too much of your income toward existing loan payments. You should pay off some of this debt before applying for a personal loan and get your DTI under 43 percent.
Check Your Loan Purpose
In most cases, a personal loan can be used for a variety of purposes, but some lenders may be more restrictive. For example, you may not be able to use the funds to keep your business afloat or to pay education expenses. Be sure to check with the lender regarding the application of funds.
Check Your Details
Always double check your loan application before submitting it. Anything the lender cannot verify will probably result in a rejection. Even the smallest thing could be very important.
Other factors to consider during a loan application include limiting the number of applications, checking your credit report and paying down your debt to prove responsibility.
Reasons for Rejection
The most common reasons for loan rejection are:
• Bad credit history
• Not enough income
• Wrong purpose
• Missing information
• Too much debt
Even if you do everything right, you may still not get a loan. The lender can reject your application for any number of reasons outside what is listed above.
If you need a personal loan and are unsure of where to turn, DR Credit is always available to assist you with your financial needs.
