There can be plenty of reasons you may seek out a personal loan. Perhaps you need to replace your roof, pay off high-interest debt, or make a large purchase. Whatever your reason is, a personal loan can be the perfect solution to your financial woes.
However, when you apply for a personal loan, there’s no guarantee that you’ll get approved. Some lenders have stricter standards than others. For example, borrowers with less-than-stellar credit scores may find securing a loan from specific lenders challenging.
Sure, it’s not easy to get approved for a personal loan. But there are ways to make your request stand out and increase your chances of getting approved without sacrificing financial stability.
Before applying for a personal loan, you can prequalify. Prequalification is an informal process that uses your credit score and other financial information to estimate your monthly payments and interest rate.
It allows you to explore and think through your loan options without hurting your credit score. Essentially, prequalification is an excellent way to compare multiple lenders and find a personal loan that fits your needs before applying.
But prequalifying for a personal loan doesn’t guarantee or promise that you’ll get approved when you apply. You can only use prequalification to find and compare lenders on price, interest rates, payment options, and more.
Then, when you’re ready to apply for a personal loan with one of those lenders, you’ll be able to use that knowledge to further your chances of getting approved.
Improve Your Credit Score
Whether you’re looking for loan places in Rock Hill SC, or Houston, TX, the credit score is a crucial factor lenders consider before approving your application. A poor credit score indicates that you have a history of not paying your bills on time. While you may have valid reasons for missing payments, such as being laid off or having unexpected medical expenses, lenders are unlikely to consider these.
Also, while some lenders accept bad credit borrowers, the interest rates on their loans are usually higher than those offered to people with good or excellent credit. If you have a poor score, focus on improving it before applying for a loan.
There are many ways you can do such as:
- Make timely payments.
- Keep old accounts in good standing.
- Keep your credit mix diverse.
- Limit requests for new credit.
- Consolidate your debts.
Check Your Credit Report And Dispute Errors
You must know where your credit stands before applying for a personal loan. You can do so by reviewing your credit report and ensuring there are no errors or mistakes that could hurt your chances of getting approved.
For example, if there’s an open account that shouldn’t be on your report or a negative mark you didn’t know about, it could be time to dispute it. It can take up to 30 days for a creditor or collection agency to respond, so don’t delay checking your credit report and ensuring everything is accurate.
Once resolved, your credit score will get a boost. So, checking your report and disputing any errors before applying is worth it.
Pay Off Debt
Less debt means less stress and higher chances of personal loan approval. Why? Because creditors want to lend money only to people who can pay it back. If you have too much debt, it could be a sign that you won’t make your payments on time or won’t be able to pay off your loan in full within a reasonable amount of time.
If you can pay off all or some of your debt before applying for a personal loan, do it. You’ll have an easier time getting approved and a better interest rate than someone with many outstanding bills.
Increase Your Income
Keep in mind that lenders look at your ability to repay a loan. Lenders want to know that you have enough money in your account to pay back what you borrow—and they want proof. If your income isn’t sufficient, getting approved could prove difficult.
And even if you do get approved, your interest rate will likely be higher. So, consider growing your income first if you plan to apply for a personal loan. It could mean taking on side gigs or freelance work.
Or, looking into starting a small business on the side, the more money you bring in, the higher your chances of getting approved for a loan.
Only Borrow What You Need
While it might be tempting to borrow more than you need, doing so can make it more challenging for you to get approved for a personal loan. It can be risky if you use the extra money for something else. So stick to borrowing what you need and don’t go overboard with debt.
Get A Cosigner
If you can’t get approved for a personal loan, consider applying with a cosigner. It could be your close friend, colleague, or family member with a stable income and good credit score. With a cosigner’s help, you may increase your chances of getting approved.
Just ensure to pay on time and in full each month. Otherwise, you could put your cosigner in a tough spot if you default on payments.
Take your time to consider your situation and ensure you have a realistic expectation of what you can get. Then, if you have any questions, ask the lenders before applying. Remember, even if you don’t get approved immediately, it doesn’t mean it won’t happen in the future!
Your financial choices, like paying off debt or saving up an emergency fund, will all help improve your chances.