How to improve the chances of your loan application being approved
Applying for a personal loan might seem daunting, particularly if you've never done it before. When you need finance, waiting to hear if your loan has been approved can be a bit nerve-wracking. However, you can increase your chances of being approved by understanding what lenders are looking for and preparing your application according to their requirements. Here are some tips on how to improve the chances of your loan application receiving the green light.
1. Check your credit score
Your credit score is an important factor that lenders consider when evaluating your creditworthiness and the likelihood of you repaying the loan on time. Before applying for a loan, it is advisable to check your credit score through one of the major credit bureaus, such as Illion, Equifax, or Experian. If your score is lower than expected, investigate the reasons why and take steps to address them.
2. Pay down any existing debt
If you have existing debt and are planning to apply for a home loan, it is advisable to pay off as much of it as possible before submitting your application. That’s because your debt-to-income ratio (a measure of how much of your income goes towards paying debt) can be a key factor that most mainstream lenders consider when deciding whether to approve your home loan application. However, if you are applying for a smaller loan, the lender may focus more on your transaction history on your bank statement rather than your debt-to-income ratio.
3. Understand the lender’s requirements
Different lenders have different standards and criteria for approving loans based on the type and amount of loan you are applying for. Depending on the lender, factors such as your income, employment history, spending habits, or credit score may be given more weight. To avoid any confusion or disappointment, it's always a good idea to research the specific lender's requirements and expectations. You can usually find this information in the FAQ section of their website. By understanding these criteria, you can focus your efforts on meeting or exceeding them, thus improving your chances of getting your loan approved.
4. Provide complete and accurate information
Before submitting your loan application, make sure all the information you provide is accurate and complete. Any inconsistencies or missing information can result in delays or even rejection of the application. When applying for a home loan, you should be prepared to provide comprehensive financial information, which includes your income, debts, assets, and employment details. However, for smaller or short-term loans, you will generally only need to provide your personal, contact, and bank statement details. As many small loan providers now offer a completely paperless service, the lender may be able to calculate your suitability for the loan electronically.
5. Be Honest
There’s no room for little white lies on your loan application, so never attempt to inflate your income or hide your debts. If discovered, this can lead to immediate rejection, so being honest about your financial situation is always the best policy.
6. Borrow within your means
When you apply for a loan, it's important to think carefully about how much you really need. You should only borrow what you require and can comfortably pay back. Borrowing more than you need could make it difficult to meet the repayments, and the lender may require security. To avoid taking on more debt than you can handle, be sure to apply for the right amount and only borrow within your means.
7. Show stability and a good repayment history
Lenders prefer borrowers with a stable income and employment history when assessing a loan application. A consistent income and low frequency of job changes increase the chances of loan approval. However, you will also need to demonstrate your ability to repay the loan, so a good repayment history with no defaults is highly valued. If you're self-employed or have an irregular income, you may need to provide additional documentation to prove your financial stability or find a lender that specialises in assisting self-employed clients.
8. Prepare your documentation
Before applying for a loan, consider all the necessary information you'll need to provide to support your application. Having everything in order can speed up the process.
9. Don't make multiple loan applications
Every time you apply for a loan, your credit score may be impacted. If you apply for multiple loans within a short period of time, it could indicate to lenders that you are experiencing financial difficulties, which may make them reluctant to approve your application. Therefore, it's always better to research first so you can find the lender that best suits your requirements. Then, focus on submitting just one loan application at a time.
10. Keep in contact
Most lenders offer an online portal where you can log in to check the status of your loan application after submission. However, they may also try to contact you by phone, email, or SMS to clarify any uncertainties related to your application. Make sure you keep in contact with the lender and be readily available to answer any questions that may arise.
Get that loan now!
By following these tips, you'll increase your chances of loan approval and hopefully secure the finance you need. And remember, here at Safe Financial, we offer a quick and easy online application and approval process for cash loans of up to $5,000. Once a loan is approved, the cash is usually transferred to your bank account within a few hours - so you can quickly get the extra funds you need for the things you want!