If only it were as easy as applying for a loan and being approved. Unfortunately, you’ll have to put some work into boosting your chances of approval. You’ll need to show lenders that you’re capable of paying it back by demonstrating a favorable credit history.
That’s not the only factor that comes into play when determining your eligibility for loan approval. Here are some of the most important things to do if you want to increase your chances.
Make Sure Your Credit Score Is In Order
Don’t apply for a loan until you’ve taken a look at how your credit score is doing. Look at your full credit report by going online or requesting one from one of the credit bureaus.
Take a look at whether there are any errors or factors you will need to fix before asking for a loan. Having as high of a score as possible should be your priority before even considering going to a lender.
If you’re behind on anything, make sure that you are completely caught up. Any late payments pending will pretty much ensure you won’t be approved.
Lower Existing Debts
Although having debts won’t necessarily ruin your chances of getting a loan, it’s best to keep them as low as possible. If you have a significant amount of outstanding debts which are much greater than your income, the lender may raise an eyebrow.
Make sure to keep your total debts lower than 30% of your overall allowance. Anything higher will make it much harder to prove that you are capable of paying more debts on top of what you already owe.
Consider a Cosigner
In some cases, you may need a cosigner to increase your approval chances. A cosigner agrees to pay the loan for you if you fail to meet your payments. However, you can’t choose just anyone to be your cosigner. They should have a good credit score and substantial income to prove they can support their claims.
Choose The Right Lender
It’s essential to choose to apply to a lender who is a good fit for your circumstances. Different institutions have different terms. Therefore, make sure that you do your research before your final application. Taking the time to choose the lender who you have the best chance with will improve your odds.
Apply When You Have Reliable Income
Some loans require proof of your income. The purpose is to see whether you’re capable of affording the monthly payments. If you have a reliable source of income, you’ll significantly improve your odds of being approved for a loan.
Applying when you’re in between jobs or only working part-time is a bad idea. Wait to apply until you have a consistent paycheck.