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.