When you apply for a personal loan, you ask a company to lend you a large amount of money. It is but natural for the lenders to do all that’s possible to assess your creditworthiness and your repayment capacity to ensure that they lend money with minimum risk.
If you are planning to apply for a personal loan, here are some suggestions that could help improve your chances of getting a loan approved:
Checkpoints to Improve Your Chances of Getting Your Loan Approved
1. Fact-check your credit report
Before you fill a personal loan application form, request for your credit report from all the credit bureaus. You can also pull up your credit report online.
Don’t accept the credit report at face value. Check the report for any discrepancies. Ensure that it has your correct information. A tiniest error in the report has the potential to damage your chances of a loan approval. Some of the facts you need to check in a credit report are as follows:
- Unexpected account balances
- Credit accounts you didn’t open
- Unexpected hard inquiries
- Charges you don’t recognize
If you find any unauthorized activity or inaccurate information, get in touch with the credit bureau and request them to investigate.
If everything in your credit report is true and you have a good credit score of 750 and above, you can tick off the first checkpoint.
2. Keep your work situation steady with consistent income flow
Your income is one of the important financial factors in the personal loan approval process. Lenders need to be sure that you earn enough money to repay the borrowed loan and also that your income comes from a reliable source. That’s why having a steady job is important.
If you are planning to apply for a personal loan, try to keep your work situation steady; don’t change jobs. Through your employment stability, you come across as a responsible borrower to the lender with adequate income to repay what you owe.
3. Improve your debt-to-income ratio (DTI)
DTI is the ratio of how much of your income goes into paying off your debts. The higher the ratio, the lower are your chances of getting your loan approved.
To lower your debt, do a full assessment of your personal debt and develop a plan to either increase your income or reduce your debts.
4. Get a co-borrower with a strong credit profile
DTI ratio and credit scores are strong influencers on the lender’s lending decision. If you think your credit score of the DTI could do with a little boost, don’t hesitate to get in a co-borrower with a good credit score and a lower DTI. Your co-borrower can be a spouse, parent or a sibling.
With the tips mentioned above and with a positive mindset, you can dramatically increase your odds of getting your personal loan approved.