A personal loan is a great way to get cash when you badly need it. Banks, credit unions, and online lenders typically offer this type of loan. Personal loans are designed to provide quick access to money. But it doesn’t mean you’ll be automatically approved if you apply for one. Here are 7 ways you can improve your chances of getting a personal loan.
1. Review your credit records
Before you take out a loan, you should know where your credit stands. You can start by pulling out your credit records from major credit bureaus and ensuring they’re accurate. The Consumer Financial Protection Bureau (CFPB) recommends checking your records for errors such as incorrect credit limits and erroneous account reports.
2. Make yourself creditworthy
Is bad credit standing in the way of a loan? Thankfully, there are many ways to rebuild it. One way is to save money. Once you have three to six months worth of savings, lenders will be more confident in approving your personal loan. If you have existing debts, lowering them can do wonders to your credit. To do this, you should pay more than the monthly minimum required to cover debts. Alternatively, you can prove your credit worth by showing the lender you’ve been keeping up with a budget. It shows them you are financially responsible.
3. Give your income a boost
Lenders will consider your annual income to see if you can afford a loan. The good news is you won’t be limited to your salary. If you have other means for earning like benefits, a business, or even a side job, you can significantly lower your debt-to-ratio income and increase your chances of getting a personal loan.
4. Choose your loan wisely
Personal loans are either secured or unsecured. Depending on your circumstances, your choice can affect the lender’s decision in approving your loan. Borrowers with less-than-ideal credit should take out a secured personal loan. It has lower credit requirements and interest rates. However, you do need an asset such as a home or car and use it as collateral. People with good credit can opt for an unsecured personal loan. It doesn’t require collateral. What matters is you are creditworthy and able to repay.
5. Have someone co-sign your loan
If you have a somewhat average credit score, you should find someone with better credit to co-sign your loan. A co-signer will put your lender at ease since they will be shouldering the responsibility of repaying your loan. That is, in case you’re unable to.
6. Decide on how much you’ll borrow
When calculating your desired loan, you should ask yourself these questions – how much do I need, and how much can I actually afford? Most people mistakenly apply for loans they can’t pay off. If you’re applying for a loan, only get the amount necessary to sustain your finances.
7. Explore your options
Lending institutions have their own criteria for granting loans. Interest rates and repayment terms will also vary. So you better shop around and compare personal loans from different lenders. Not only will this get you the best deal. You’ll also find a lender who will most likely approve your loan.