Getting a personal loan can be a daunting process, requiring you to subject yourself to the financial scrutiny of others. These others often make you wait several days to learn whether or not your loan application has been approved, which can be a nerve-wracking time. To make the process a bit easier, here are five tips for increasing the odds of getting your loan approved.
Check Your Credit Score
Before you go anywhere near a loan application, check your credit score and know your number. If there are errors on your credit report, contact all three credit bureaus and fix them before submitting a loan application. If you’re credit score is lower than you would like but accurate, be very careful choosing a lender. As LendingTree reports, there benefits to comparison shopping rates regardless of your credit situation, and you could save as much as 4.74% by reviewing lenders in one location.
It seems obvious, but sometimes borrowers need a loan badly enough that they forget to explore all of their options. They get so caught up in finding a lender willing to work with them that they forget not all loans are created equal. Shopping around can help you get a better rate and increase your odds of success. Different lenders have different approval criteria. Shop around and ask if your credit scores and income level meet various lender’s standards. If not, you’ll know not to waste their time or yours applying.
Stall the Application
Don’t allow yourself to be pressured into filling out a loan application until you decide you are ready. Whenever you apply for a loan, the lender checks your credit. The fact that they checked is then noted on your credit report, which can hurt you later. Allowing multiple lenders to access your FICO score can actually lower it, making it harder for you to get a loan. In fact, “too many loan applications can ruin your credit” according to Forbes. Sometimes lenders can’t quote you an exact interest rate until you apply, but if you know your credit score they should be able to provide you with an estimate.
Think Job Interview
CPA Phillip Taylor recommends treating talks with loan officers the same way you would a job interview. Dress the part and do whatever you can to make a good first impression. Be prepared to answer questions about why you want the loan and how quickly you plan to repay it. Know how much you make and spend each month to prove to the loan officer you have adequate income to make your monthly loan payments. Gather every document the loan officer requests before submitting your application, as incomplete applications are often denied.
Offer Added Security
If your credit score is under 640, you may have trouble securing a loan unless you have collateral or a cosigner. If you secure your loan with collateral, you essentially take an asset that you own, such as your car, and promise the lender that they can take that item from you if you default on your loan. This makes lenders more comfortable approving your loan because you are giving them an asset they can sell to recover their losses if you fail to pay. A cosigner can also help. A cosigner is another person with good credit who agrees to be responsible for your loan if you default.
The key to getting a personal loan approved is research. Find out your credit score and what criteria lenders are looking for. Take an honest look at your financial picture and see if it matches the underwriting criteria of your preferred lender. If it doesn’t, look for alternate lenders rather than collecting a pile of rejection letters. If it does, submit your loan application with confidence.