There are a lot of factors that come to play in determining whether you will be approved for a personal loan. There is no holy grail technique that can guarantee that your application will be approved. But there are some things that need to be in your favor so that you can stand a higher chance. Some of these factors vary depending on your lender.
Most of the important factors that can work in your favor or against you include your credit score, your income, debt-to-income ratio, your payment history, and other details like your education level, and cash flow.
One sure thing that lenders want to achieve is that they approve loans for individuals who can pay back in time, and also meet their minimum requirements. We will look at five tips that can boost your chances of getting approved form a personal loan.
The higher your credit score, the better your chances of getting approved for a loan. Your credit score is a major criterion that can make or break your chances of getting a personal loan.
Hence, you need to fix your credit score by ensuring it is devoid of errors that may hamper your chances. Make sure you check your credit reports for errors. According to the Consumer Financial Protection bureau, some of the errors that can affect your score include an open account reported as closed, wrong accounts, incorrect credit limits.
You can request for your credit reports once in a year at no cost from www.annualcreditreport.com. If you find any error, you can file a dispute online via writing or phone call.
To boost your credit score, you need to ensure that you pay up your monthly bills promptly and also pay off debts on time. You can imbibe the act of paying more than the minimum when you are paying off debts. This can go a long way in impacting positively on your credit utilization ratio and in the process, it will increase your credit score. Your payment history and credit utilization ratio make up 65% of your credit score.
You can also call your customer care via the number on the backside of your credit card and request a credit limit increase. If your income has increased since you got your card and haven’ missed payment, then you stand a high chance of having your credit limit increased.
Your income includes your annual income from paid employment, and other incomes from businesses you do as part-time. This is why it is important to have a side hustle that can supplement your income. Balancing your debt-to-income ratio simply involve keeping your debt on the low while increasing your income. If you can’t increase your income, then try as much as possible to pay down debts.
Doing this will put you in good stead when you apply for a personal loan. Opening up more channels of income and lowering your debt will go a long way in improving your debt-to-income ratio. Your debt-to-income ratio is your monthly debt payments divided by what you earn monthly. A lower ratio means that your debt is under control and you can take out more loans. Despite bad credit title loans are also one choice for personal loans. You can obtain one as easy as 1,2,3.
Most online lenders usually state their minimum requirements for annual income, and credit scores on their websites. Hence, you should do well to read about your lender so that you can know and understand their minimum requirements. Also, find out if they offer the option of providing a co-signer to boost your chances.
If you are trying to request for more money than your lender is willing to lend you, then you might be asking for even more financial troubles. The higher loan amount can affect your monthly budget as you still have to cater to other primary needs, despite paying your loans. Asking for more cash may further worsen your financial woes. Hence, accept how much your lender approves for you.
A co-signer is like a partner with a stronger credit score than you have, this person can stand for you while taking out a loan to boost your chances of getting approved. For example, if you have a fair credit score, you can get a co-signer with better credit to help you stand a higher chance of being approved for a personal loan.
A co-signer will take the responsibility of paying if you default. Hence, this person must understand the risk involved and be able to take the risk. So, make sure you are open to the prospective co-signer to enable them to understand the risks involved.
In conclusion, make sure you are working with a lender that offers options that fit into your budget.