When it comes to personal loans, there isn’t a specific formula for winning approval. Requirements like income plus credit score vary from one lender to another, and certain online lenders consider non-traditional data such as free cash flow and education level.
However, it’s important to note that loan companies have one common goal: they want timely repayments, which means they only approve those who fully meet their requirements.
Here are practical tips and tricks that can help boost your chances of getting a personal loan.
Consider Cleaning Up That Credit of Yours
When it comes to personal loan applications, credit scores play a major role. The better your score, the higher your approval chances.
Be keen to check your credit reports for errors. Some of the errors which could hurt your score include incorrect credit limits, wrong accounts, as well as closed accounts reported as open. You can readily find your credit reports online for free.
Pay Your Debts Early
If you already have other debts, try making monthly payments that are quite higher than the minimums. This will significantly benefit your payment history as well as the credit utilization ratio.
And if you haven’t missed any payments or if your income has increased since you obtained your credit card, the customer care service can increase your credit limit when you ask them to.
Work on Your Debt-to-Income Ratio
Loan applications often ask for your annual income. But the good news is that you can always include funds earned from part-time work. So, consider starting a side hustle to complement your income, or at least work toward a salary increment at your full-time job.
Boosting your earnings and lowering your debt goes a long way in improving your debt-to-income ratio. A lower DTI ratio demonstrates that you’ve full control over your current debt and can take on more.
Take What You Can Pay
Requesting more money than you actually need can be seen as a risky endeavor by lenders. Carefully evaluate the reason why you’re borrowing the loan, estimate a specific dollar amount for that financial problem, and only request that amount.
Besides, a larger personal loan squeezes your budget since higher loan payments impact your ability to fulfill other financial obligations, like student loans and mortgage payments. Generally speaking, debt consolidation is a choice for those with multiple, high interest rates.
Consider Going for a Co-signer
If you’ve fair credit scores, adding a co-signer with a stronger credit history and higher income can significantly improve your chances of approval. Since the co-signer is equally responsible for repaying the requested loan, it’s important to co-sign with someone who’s capable of bearing the risk.
Of course, you may be ready to repay the loan, but you can’t really predict the loss of a job, disability or any other events which could severely impact your income levels and ability to repay the loan. Make sure that you have an honest conversation with your co-signer so that they fully understand the potential risks before agreeing.
Choose the Right Lender
The law requires lenders to disclose their minimum requirements for annual income as well as credit scores.
If you meet the minimum qualifications and need to see the estimated rates plus terms, go ahead and undertake the pre-qualification process. With most lenders, pre-qualifying attracts a soft credit pull, which doesn’t usually have any impact on your credit score.
So, consider pre-qualifying with a couple of lenders and compare their rates plus terms. Typically, the best loan option is one that has costs and payments which fit into your budget.
Try To Avoid Credit Card Consolidation
Utilizing a personal loan to settle credit card debt on multiple accounts and consolidating the payments is typically one of the most common uses of personal loans. Securing a lower interest rate on the personal loan than what you were actually paying on the credit cards can go a long way in saving you substantial amounts of interest.
Nonetheless, if you’re planning to consolidate expensive credit card debt, it’s important that you exercise caution. You could actually end up sabotaging your money-saving efforts and potentially hurting your credit scores.
Before applying for a new personal loan, consider paying close attention to the lender’s original fees. Whereas some lenders offer lower interest rates, you may actually find that they also charge an original fee which effectively hikes the total cost of your loan.
With the help of a loan comparison calculator, it’s possible to compare interest rates, original fees, and the true cost of financing offered by different lenders.
Be Cautious With Automatic Withdrawals
Certain online lenders provide borrowers with incentives which allow for easier access to their bank accounts. And this enables them to automatically withdraw the monthly payments from your account.
For instance, they could give you a discount for signing up for automatic monthly repayments. If you’re okay scheduling automatic withdrawals, then take advantage of its affordability and increased convenience. But if you don’t have a consistent pay schedule, you may want to avoid these kind of arrangements. If the creditor demands that you make automatic payments, then you’ll have to decide if that’s a deal-breaker for you.
You don’t want to run into trouble making loan payments, right? Then only settle for what you’re comfortable with. Also check if there’s any possibility of the loan’s terms and conditions being modified by the lender.
In case you default the payment terms will the lender allow for the arbitration process to take place? Or you’ll have to go through a court system? These are some of the things you should ask yourself before taking up the loan.
Getting a personal loan is a joke. There are so many procedures. Plus, you will be subjected to numerous parameters. From your credit history to the debt-income ratio, getting approved can be a daunting task. However, the above tips will help you get approved in a matter of minutes. So, apply for your personal loan with Citrus Loans, get approved, and enjoy your money to the fullest.