Personal loans are very helpful for those with an immediate need of money that can be paid in a short period of time. Since there is no required collateral and lenders are not too keen on the loan purpose, it is convenient and has a faster approval, making it one of the first choices to fulfill financing needs.
But of course, its convenience and flexibility also come with setbacks. Since no collateral is issued, credit scores are computed to assess if the borrower is eligible for such loans. Knowing how to get high credit scores will minimize the possibility of getting rejected on your loan application.
This site explains how you can avoid being rejected when applying for a personal loan.
Improve your Credit Score
Since banks or lending companies do not have any fallback for the loan they’re willing to lend, they ensure that the applicant has a capacity to repay them. And they’re not only looking for your capacity but also on your credit history to ensure that your previous loans were well handled and paid off. Giving a loan with no collateral is very risky to them, thus, the approval process though is faster and stricter.
For a higher chance of approval, you are advised to reach a credit score of 750 or up. Before applying for a personal loan, check your credit score first to ensure better approval chances. Just grab a copy of your latest credit report. However, if it seems you have a bad credit, there are still ways you can apply for a personal loan, for more details you can check it here.
By getting a low score, your chance of being approved is significantly reduced.
Consider your Income
The money you use to repay your debt will definitely come from your monthly income. How much you earn in a month greatly affects how many loans you will possibly be approved of. Banks and lending institutions will evaluate your monthly net income to determine how much extra money is available for you to shoulder your monthly amortizations.
When you have insufficient money to repay your monthly loan amortization, chances are you will be declined for the loan or be nominated to lower the amount of loan you’re applying for.
Ensure that you analyze your repayment capability carefully before nominating the amount of loan you apply for.
Ensure Personal Details are Correct
Yes, ensuring that your personal information written on the application form can help you have your loan approval done faster. This may sound odd, but having completely filled-up application form with legitimate details will make your loan processed smoothly.
Financing institutions are very keen on the information you give because this is where they will base their credit inquiry. If they find any inconsistencies, you might be rejected for the meantime until you get the information right.
If loans are applied online, you’ll likely receive a call to verify all the information you submit. They will validate the details to ensure you put the right ones, so always prepare yourself to provide the correct pieces of information to avoid being rejected.
Don’t Apply for Multiple Loans at Once
Multiple loans are a no-no for lenders. By doing so, you create an impression that you’re trying to borrow a large amount of money by chopping up loans among different lenders. Plus, it also requires them to put in more work by computing your capacity to repay your debt. Just provide the specific loan amount you need, no matter how big or small, so they can evaluate it and give feedback if they can lend it to you or if they’ll have to reduce your loan amount.
Also, try to consolidate your loans or repay the existing ones first before you apply for a new one.
Pay Attention to Debt-to-Income Ratio
Paying attention to your debt-to-income ratio will help you a lot to avoid possible problems to pay in the future and will save you from bad credit records.
Apply a loan that only suits your monthly income. Your debt must not exceed your income. Submit loan documents so that creditors can easily compute your income capacity. If possible, submit your pre-tax earnings and ensure that you clearly stated all sources of income.
Don’t make it a habit of declaring higher income than what you honestly receive in a month. Whether if a lender finds out the real amount you earn or not, it will not save you from having difficulty paying the loan, especially if your monthly amortization exceeds your net income.
Moreover, criminal charges await you if you tweak your actual financial standing.
Make Sure to have a Banking Relationship!
Lastly, ensure that you have established an excellent banking relationship. This means that you maintain an active account with a bank and if possible, you keep relatively high deposits.
Having a good deposit relationship with your bank can lead them to easily justify your loan requirement. Build a six-month deposit relationship before you apply for a loan.
