The two major things that lenders check before approving your loan is your credit score and debt-to-income ratio. Your credit score can put you in vantage position as you will be seen as being creditworthy if you have a good credit score and your DTI is how well you can keep your debts in check in relation to your earnings.
The lower your DTI, the higher your chances of being considered and approved for a loan. It shows that you are responsible with your spending and you earn more than the debts you have running.
The rates and credit scores required by lenders vary. Most times, interest rates on personal loans are lower than rates on credit cards. As soon as you are approved for a loan, you will get a fixed rate from your lender.
Your rate doesn’t go up and down and remains the same monthly. This is not so for credit cards as it can go either up or down.
One other benefit of a personal loan is that it has fixed term, you have a preset time to pay off the loan you get on a monthly basis. If you want a loan that will mot offset your budget if you are someone who sticks to a budget, then a personal loan will be right for you. The monthly payment amount is fixed, and you have a plan for your other expenses and you can easily manage your finances this way. The life of a personal loan can run for a year to five years, and payments are made monthly.
Get to know what your credit score is. You can check your credit scores on sites like Credit Sesame, credit.com, and Credit karma among others. To check is free on most of these sites. You don’t need to have a perfect credit score of 850 to qualify for a loan. However, having a good score can help your chances because lenders consider borrowers with a good credit score as being trustworthy, credit-worthy, and responsible in their finances
Hence, the higher your credit score, the better your chances of getting approved for a loan.
Your credit score is an accumulation of your credit-related activities which include how often you pay debts, utilities, and other responsibilities. This score is put together in three-digit with those with scores above 800 being considered as having a good score. The Federal Trade Commission stipulates that you are entitled to a free copy of your credit report yearly from the three major credit reporting companies in the United States of America.
When you get your credit report, you will be able to check for errors and see where there are payments not captured. Do well to ensure all errors noticed are fixed and properly documented so that you can have a better chance of getting a personal loan from lenders.
Before you apply for a personal loan, try as much as possible to boost your score. There are a lot of things you can do to improve and boost your credit score. You can check to take care of bills that are overdue, pay down credit card balances, and look if you can get a more reasonable interest rate on an existing loan you are servicing or look around for a lender that offers a lower rate. The interest rate you get from your lender depends on your credit score. So if you can boost your credit score before applying, then you will be able to get a loan at a lower rate.
The debt-to-income ratio is the amount of your monthly income that is required to cater for recurring expenses like a car loan, mortgage, rent, and other personal bills. You can make use of the online calculator on the website of your lenders to know your debt-to-income ratio.
If you have a debt-to-income ratio below 35%, then that’s a healthy one. However, if getting a personal loan will make your debt-to-income ratio surge to around 45% to 50%, then your lender might not approve your application.
When you apply for your loan, make sure you have all the required documents in order. Avoid typographical errors in your application and provide all documents as required. Some of the documents required include your Date of birth (DOB), Social security number, your contact details, employment status, and a payslip. These requirements may vary from lender to lender.
Make sure you look around to get lenders that are licensed, and credible. Read reviews and ask people who have used these lenders in the past to know what their experience was so you can be better informed. Title loans are always another way to get funded in less than 24 hours.
Narrow down the number of lenders based on what you have read or heard about them and then request quotes from these lenders. From the quotes decide which of them you will deal with.
With the tips highlighted here, you can easily get approved for a personal loan as long you adhere to the strategies mentioned.