5 Personal Loan Application Tips to Get Approved Faster

Loan approval

Personal loans come in handy whenever you need immediate cash. Whether it’s for that unexpected hospital bill not covered by your insurance, or to finance a time-sensitive business opportunity, it’s always helpful to have access to cash. Getting a personal loan application approved can, however, be frustrating at times. Major banks and private lending institutions do not simply hand you money and let you off easy. It’s a stringent application process, one that may take some time. With up to 7 million credit applications being refused last year, it’s useful to know your way round the system.

To get approved faster, here are five tips you can employ.

Look Up Your Credit Score

The vast majority of people today don’t really care about their credit score. That is, however, until they need to apply for a loan. Knowing your credit score allows you to gauge your loan options, refuse those that have too high interest rates, or avoid those which you know you cannot qualify for yet. Avoid submitting loan applications if you are already aware you do not qualify for them, merely to test your luck. For every loan application you submit, it gets included in your credit report and your score slightly drops.

Boost Your Credit History

When applying for a personal loan, banks and private institutions vet your credit history to determine your eligibility, or lack thereof, for a loan. Make it a habit to pay your credit card balances, regardless of how small they are, on time. Establishing a good track record on your credit cards for multiple years will indicate to lenders that you are responsible in paying down debt in a timely manner.

Identify the Type of Personal Loan You Require

Yes, there are different types of loans if you were not yet aware. Most people talking about loans usually refer to what’s termed as unsecured loans. From a technical perspective, however, other traditional loans like auto, home equity, and payday can also be considered personal loans. If a lender identifies you as a risky or unqualified candidate for a personal loan, they may offer a secured loan instead. This type of loan involves putting your home, car, or any other asset deemed fit for the transaction as collateral until the debt is paid.

Look For a Lender Based on Your Score

Once you’ve zeroed in on the type of loan you need and your official credit score, it’s time to start looking for a lender. If your score is less than 700, anticipate a slew of rejections from the multiple major banks you plan on applying to. On the other hand, those that do approve your loan with a below 700 credit score will usually command higher interest rates. A credit score that is less than 640 will also identify you as a red flag with conventional local banks.

Do the Math

It’s absolutely possible to have a good estimate of how much you will be paying as interest for your planned loan application. You can use a free online loan calculator to determine monthly payments and final amount. You simply need to enter the amount you wish to borrow to get started. The maturity time of the loan is also chosen along with the fixed rate of interest.

Financial institutions such as banks and building societies are becoming increasingly wary of who they give credit to. Using the aforementioned tips will help put you into a strong position if you’re looking to take out a loan.

What to do Wednesday in Personal Finance? How about a personal loan?

Think Finance

What would you suggest as the best course of action in this situation?  If you have been following my blog for the great length of time that it has been around, ok since last week, you would know we recently became a two income household. 

Here is where the story starts: One income, two kids and a wife all on a salary of 100k minus 50k.  I was earning close to 50k when we had our second child.  We have 2 cars and a mortgage payment but to help offset some of this we have a rental unit in the top portion of our house.   Our debt journey started once we graduated college and started popping out the little ones.  My wife wasn’t working when we first found out she was pregnant with our first child.  She started to substitute teach until the doctor pulled her out of work due to her pregnancy. 

Let’s face it having a child is expensive; forget about all the things that you know you will have to spend your money on like food and diapers.  You lose track of things like you have to keep the house warmer in the winter so their little fingers don’t get cold.  Health insurance takes a big jump going from couple to family.   As time passes and months go on we find ourselves with some credit card debt spread out over a few cards with rates ranging from 9.99% to a little over 16%. 

We went to the local bank to take out a personal loan but were denied because the income we had covered our expenses and they couldn’t see where the additional money would come from to pay the loan.  I could tell them where it would be when I consolidated all the credit cards onto the loan, but let’s face it an actuary in their home office said we were a risk they were not willing to take on. 

Fast forward a few months, the wife has a job we are on the up and up.  We have managed to stay current on all of our debt obligations and are exploring that personal loan again.  With interest rates at rock bottom now, we would be crazy not to consolidate.  We are going to approach the lender we had previously with my wife’s new fresh off the press pay stubs and try this again. 

We explored the 0% credit card offer and found out that we would be further ahead to take out a personal loan.  After the 0% expired we would be hit with the interest that had accrued all year on the balance.  You are not a rate chaser are you?

We talked about a home equity loan, but we just purchased our house 2 years ago and didn’t have sufficient equity to take out a loan against.  So that idea quickly vanished. 

We think we are going to go with the personal loan, but if anyone has any other suggestion on a good course of action, I would certainly entertain them.  I think the personal loans are around 3-4% at the credit union we are members at.

PHOTO BY: @Boetter