There are many reasons why people apply for loans. They may be doing it so that they can make their ends meet or sometimes it is for achieving a lifelong dream. No matter what the reason may be, each one of these people needs to apply and pass before they get the funds that they seek.
Are you considering to take out a personal loan? There are a few things that you may want to take care of before you apply. After all, you want to improve your chances of getting approved.
Lenders are quite strict and rightfully so. Loans involve money, and lending money has many risks. If you were a lender, you would want to know your borrowers too. So, what do you need to do to improve your chances?
Different lenders have their own offers and criteria. Generally, this is the set of standards that lenders use:
Personal loans are not meant to be long-term debts. The purpose of this type of loan is to help you out with a short term financial problem. You need to determine how much you really need and apply for that exact amount. If your monthly earning is not enough to support the required repayments on the amount you're trying to get, then the lenders won't approve your loan.
You can consider reducing the loan amount or extending the loan term to reduce the effect of the loan repayments on your current cash flow.
You can check with your bank whether they have any loan products that you are eligible for-- this setup is ideal in the sense that your bank already has a pretty good indication of your financial situation. Regardless of where you try to apply for a loan, effectively managing your finances will help show the lender that you're ready to take on a personal loan.
A good demonstration of how efficient you are at managing your finances is putting some saving aside in your bank account while still paying your bills on time. Most bank accounts require you to have a maintaining balance. As much as possible, do not overdraw your account. Doing so negatively impact your account history.
The higher your credit score or credit rating, the lower the interest rate of your loan. Having a high credit score also increases your chance of getting approved for a loan. Much like your account history, you can maintain an excellent looking credit record by paying your bills on time. Any missed payments of your bills or other debts will reflect on your credit rating. These indications that you are a risky borrower can decrease your chances of getting approved for the loan.
You should also avoid applying for multiple loans at the same time. Having numerous applications for credit products can affect your chances of loan approval.
Applying for a loan is relatively easy for as long as you can prove yourself. As you might have noticed, the last two items are about showing that you are a responsible borrower. This tip is no different. However, this time, we are going to focus on your savings. You can demonstrate that you are financially responsible by proving that you are regularly contributing to your savings.
You need to provide proof that you are capable of setting some money aside every week or every month. This gives your lenders an impression that you are likely to be able to manage regular loan repayments.
Before you apply for a personal loan, make sure that you have crossed out all the other options. Generally, personal loans have lower interests than credit cards. However, some cards come with a 0 % introductory offer on purchases. This kind of offers enables you to spread the cost of big purchase interest-free.
Banks and lenders are not the only places where you can borrow money. You can search for peer-to-peer lending, which is usually available online or via apps. However, you need to make sure that you do your research before accepting any offers or giving your information.
Depending on your lender and circumstances, there are cases wherein the larger the loan, the lower the interest rate. Some lenders price their loans in such a way that you can actually save money by borrowing slightly more. So really do your research.
As mentioned previously, doing so can negatively affect your credit score. Applying for multiple loans make you look desperate, which in turn gives an impression that you may not be capable of paying the money you plan on borrowing.
If you are applying for a secured loan, then you should be aware of the risks that come with it. Secured loans require collateral-- so you are putting yourself in a position where you could possibly lose a property like your home, car, etc.
On the other hand, unsecured loans do not ask for collaterals but have higher interest rates.
There are many things that you need to know and understand when taking out a personal loan and choosing the right loan provider for your needs. Yes, there are hundreds of lending companies out there with varied terms, interest rates and loan amount offers. Just be sure to shop around, compare the offers and choose the best one that works for you.
April is an Editor at Scoopfed, contributor at Hubpages and has been an enthusiast of food articles. She previously worked at a BPO Company and now enjoying her job as an SEO specialist at [MJwebs]...
