Thinking about getting a personal loan? Tip number one: look into improving your loan approval odds.
See, there’s a reason personal loans are so highly sought after. Whether you’re looking to refinance or consolidate your debt, a personal loan is a great solution. Having one fixed monthly payment takes a lot of stress out of the equation.
Want to know how to get approved for a loan? Here are some of the main things you should consider.
1. Choose a Loan Type
Personal loans come in two main types: secured and unsecured.
A secured loan requires you to pledge collateral, such as your car or home. If you fail to pay your loan, the lender will seize the collateral instead. These loans usually have come with lower interest rates and looser credit requirements.
Unsecured loans don’t involve collateral, but you’ll need a high credit score to get approved. You’ll also need a proof of income statement. If your employer hasn’t provided one, you can use a pay stub generator to create it.
2. Tally Up Your Debt
This may seem obvious, but it bears mentioning. Before applying for a personal loan, figure out how much money you need to borrow. Make a tally chart of all the existing debts you want to refinance or consolidate.
Once you calculate the amount you wish to borrow, don’t request more than that. As a general rule, loan approval gets easier the less you ask for.
3. Check Your Credit
Before applying for a loan, check your credit report with all three big credit bureaus. While you’re at it, look for any inaccurate information that can hurt your loan approval chances. If you find any errors, you should file a dispute.
Also, it’s not a bad idea to check your credit score. There are many online services that allow you to do that at no cost. In most cases, you’ll want a credit score of 660 or higher.
4. Find a Suitable Lender
Most banks and credit unions offer personal loans, but they aren’t all created equal. Before signing your loan agreement, make sure to shop at several lenders.
Depending on your credit score, you may need to opt for a lender most likely to approve your loan. Still, don’t jump at the first offer. Some lenders use fine print to conceal hidden fees or unfavorable loan terms.
5. Create a Checklist
Once you’re ready to submit your loan application, double-check it one more time. Remember, an incomplete application often results in instant rejection.
How do you ensure that your application is complete? An easy way to do that would be to create a checklist of all the documentation you’ll need. Gathering everything may involve working with your employer and creditors.
More on Increasing Loan Approval Odds
Finally, keep in mind that your loan approval odds will never reach 100 percent. No matter how good your application is, lenders can reject it at their discretion. Still, following these tips will help you avoid the most common mistakes.
Looking for more financial advice? Take a look at our list of 5 simple hacks that should help you get on solid financial footing!