There’s no doubt that personal loans are among the most popular loan options right now. Borrowers take out a personal loan to cover different kinds of expenses, such as hospital bills, utility bills, and house renovation projects. For people who are saddled with credit card debts, you can also use this loan option to consolidate your debts and reduce interest.
Regardless of your reason for applying for a personal loan, it’s a must that you know the application process and learn the ways how to get an approval with less hassle. If you want to know how to get approved for a personal loan, you better read this blog post to find out how.
What Do Loan Providers Require from a Borrower?
Before we discuss how to boost your chances of getting personal loan approval, you should know the things lenders look for in a loan applicant. Of course, requirements vary from one lender to another, but the following are the most common ones that personal loan providers require.
- Credit profile and credit score.
- Proof of income and certificate of employment.
- Credit card balances.
- Credit utilization ratio, which is the debt you’re using in comparison to the available credit provided to you by credit issuers.
Steps to Boost Your Chances of Getting an Approval
You already know what lenders require from a borrower, so maybe you now have an idea of what you should do before you apply for a personal loan. There are a lot of ways to increase your chances of getting your loan application approved. Take note of this list for that purpose.
Examine Your Credit
Get copies of your credit reports from the major credit bureaus before applying for a personal loan. When you have your credit reports, ensure that they don’t have any erroneous or inaccurate information. If you find out that there’s any wrong statement or false information about your payment history, you should dispute it.
The good thing is that disputing inaccurate or wrong information on your credit reports is very straightforward. You can file for a dispute by calling the credit bureau via phone or submitting a form online. If you’re successful in the dispute, it will repair your credit profile and give you more chances of obtaining a personal loan.
Ensure That You Have a Stable Job
Having regular employment is a significant factor in getting a personal loan. Lenders consider borrowers who have stable jobs as low-risk borrowers because they have the means to repay the principal and interest of the loan. So, before you even think of applying for a loan, make sure that you have a job, and you’re able to pay back what you owe.
If you’re unemployed at the moment or you just lost your job, there are other ways to prove that you’re receiving a monthly income. For example, you can use as proof your government benefits, retirement savings, or small business to get approved for the loan.
Manage Your Finances Well
You’re more likely to get a shot for a personal loan if you have well-managed finances. Take note of these ways to improve your credit and make you a better candidate for personal loan approval.
- Make On-Time Payments of Your Bills. You should pay your utility bills, mortgage, rent, or credit cards on time. Keep in mind that any missed or late payment of your bills can hurt your credit score.
- Maintain a Low Credit Card Balance. It’s recommended to maintain the balances on your credit cards to no more than 30% of your available credit. If your credit card limit is £1,500, make sure that your credit card balance doesn’t go beyond £450.
- Don’t Apply for Credit When You Don’t Need It. Credit options are readily available now, but it doesn’t mean that you apply for a loan or credit card to cover expenses. You should consider the fees and interests that you have to pay for loans or credit cards. So, it’s advised to get credit when you really need it, not when you just want it.
Get a Cosigner
Getting a cosigner can be a huge help for you to obtain loan approval, especially if your credit is not that good. However, the duties of a cosigner are not to be taken lightly because your cosigner will be the one to repay the loan if ever you default on it.
So, before asking someone to be your cosigner for a personal loan, you should make him/her understand the responsibilities and potential consequences of being one.
A personal loan is an excellent loan option to pay for utility bills, medical bills, or house renovation projects. But you need to keep in mind that you have to go through a personal or credit profile check when you apply for it. Review this guide to learn how you can be a strong candidate for personal loan approval.