12 Simple Tips to Get Your Personal Loan Approved
If you are facing financial crisis, personal loan helps you to solve all your financial issues. It provides money to meet your personal goal. If you need extra funds for child’s education, wedding purpose, taking a vacation, House renovation or to finance any other expenditure. It is recommended to apply for a personal loan to bypass this temporary shortfall in funds.
Personal loan is an unsecured loan. It is a loan where you don’t need to put up any collateral, such as your car or your house that the lender can repossess if you default. One must keep in mind that personal loan interest rates differ from bank to bank. They can start from as low as 11% and go up to 37% depending upon the bank’s policies for processing fees and interest rates.
Different Lenders have different set of requirements for potential loan borrowers. If you do not have a solid proof that you have the capacity to pay, your loan application may get rejected.
If you are planning to apply for a loan, the first thing is to keep up-to-date information about your credit report. So that you can rectify errors if any to avoid the possibility of being rejected.
However, to make sure that you do not face a drawback while applying for personal loan, we have come up with a list of tips that will surely help you to get your loan approved.
Check loan eligibility criteria
Before applying for a personal loan, it is necessary to check whether you meet the personal loan eligibility criteria of the lender you wish to borrow from. Lenders require applicant’s age to be in between 21 and 65 years. Some lenders also allow individuals of 18 years or above to apply for a loan. Lenders check your income to confirm that you have the ability to repay the loan. They also check whether you have any defaults on loans or on any of your credit cards.
Maintain a good credit history
Your credit history is a proof for the lender to know your repayment behaviour. If you have history of any bounced checks, dishonest loan purpose, unpaid loans, credit card delinquency, then your application get rejected. Therefore, maintain a good credit history.
Fix Your Credit Score
Check your credit score before you apply for loan. The score ranges from 350 to 900. If your credit score is more than 700, you have a good chance of getting your loan approved, a good credit score not only increases your chances of loan approval but also helps you to get an attractive interest rate. And if you have low score, your application get rejected. Each rejection will decrease your credit score even more, making it more and more difficult to rebuild your credit health.
You might think that you have good credit score, as you are paying all your bills on time, but there might be certain factors like being the guarantor for a loan that has been defaulted on, a high credit utilisation ratio, or even fraud or reporting mistakes on your credit report that could be dragging down your score. Get your credit report from credit bureaus and check for the factors that have resulted into a low credit score and try to improve it.
Maintain a savings account
If you have a bad credit and you want to take loan in future, set up your savings account and don’t forget to contribute regularly into it. It shows your lender that you are able to manage your loan repayments.
Only Borrow as much as you need
Don’t apply for huge amount, which you can’t repay. Before approving your loan, lenders check your repayment ability and income. Therefore, apply for the actual and reasonable amount you need in order to avoid loan rejection.
Avoid multiple applications
If you think that applying loan at multiple places will increase your chances of getting it, you are wrong. It not only decreases your credit score but also make your lenders feel that you are credit hungry. So, the right thing to apply at the place, where you have the best chances of getting approved.
Keep required documents ready
Keeping all the right documents ready will speed up the process of loan approval. The documents required in personal loan is less compared to other loans. Lenders usually ask for your income proofs, identity proof and residence proof before approving your loan.
Provide correct information
Lenders will verify all the details you have provided in the documents. They can even call you to verify all your information personally. Hence, give correct information about your income, address, past loan repayments. Any delay or negligence from your side during the application process may result your application declined.
Maintain job stability
If you are applying for the loan, avoid switching jobs because lenders require applicants to have atleast 2 years of work experience in a particular company. Your stable work history shows that you have steady source of income.
Don’t apply, while paying another
Lenders avoid lending money to such applicants, who apply for new personal loan while paying off the old one, considering that they might not be able to take the burden of 2 loans at a time. There must be a gap of at least 6 months between two applications.
Compare and decide
Different lenders have different loan terms and interest rates. Instead of blindly applying for few banks or lenders, it is better to do online comparison to get information regarding various charges such as processing fees, interest rates, prepayment charges that banks will levy on you. Therefore, compare the market and get the best deals that fit your bill.
Do not apply for many loans at once because your credit report contains all your credit inquiries. After checking your credit report, lender might picture out that you really are into a financial trap. Hence, chances of getting approval reduces.
If you keep the above factors in mind and present yourself with proper documentation and good credit score, no lender will reject your personal loan application.