What you can do to increase your chances of being approved for a personal loan.
7 ways to increase your chances of approval
The best defense against personal loan rejection is to know what it takes to be approved by a lender.
- Check the credit requirement. Every lender has a minimum credit score you need to meet in order to be approved. If you’re unsure, it’s best to ask the lender before you apply.
- Check the minimum income requirement. In addition, many lenders have a minimum income requirement. If it isn’t listed on the lender’s website, you may be able to find it on one of our review pages.
- Ensure your loan purpose is allowed. Not every lender allows your loan to be used for just anything. You may not be able to use your loan funds for secondary education expenses or your business. Check with your lender to ensure you can apply your funds to whatever you need.
- Meet the employment requirement. Sometimes freelance work or benefits won’t cut it. A lender may require you to have been employed by a company for a certain number or years, so make sure your work counts before you apply.
- Have sufficient collateral. If you’re applying for a secured loan, make sure the collateral you’re putting up is enough to qualify for the amount you want to borrow.
- Limit your outstanding debt. Lenders will be wary if you already have a large amount of debt. If your debt-to-income ratio is too high, you may want to consider paying off some of your outstanding balances before you apply for a new loan.
- Verify your details. Double-check your application before you submit. Missing even small details could result in a rejection. Take the time to ensure your personal information is correct when you apply.
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Factors to consider when applying for a personal loan
- Limit your number of applications. When you apply for a loan, the application is counted as an inquiry on your credit report. Too many inquiries can negatively affect your credit score.
- Keep your credit report clean. Pay your debts on time and avoid defaulting on your loans. The more you show you’re a reliable borrow, the more likely you’ll be to get a loan.
- Check your credit report. You should monitor your credit report to make sure everything is up to date and accurate.
Top reasons lenders reject personal loans
- Bad credit history. If you’ve made multiple late payments, defaulted on a loan or been in bankruptcy, a lender is unlikely to approve your loan application. Check your credit score to see what kind of problems are listed on your report.
- Insufficient income. A lender won’t approve your application if you can’t afford the monthly payments that come with borrowing a loan.
- Your loan purpose. Lenders are more likely to approve loans for debt consolidation or home improvement than vacation or secondary education. If your loan purpose doesn’t match with a lender’s expectations, you won’t be approved.
- Missing information. Lenders will verify the details you put in your application. If you’ve entered something incorrectly, your lender will probably reject your request for funding.
- Unstable employment. Lenders are very meticulous about the stability of your job. A number of lenders insist that you should have a stable job, otherwise they may reject your loan.
- Too many loans. If you already have a loan or extra debt, you might be rejected. This is because your debt-to-income ratio will be high, indicating you may not be able to pay off your loan.
There’s no way to completely guarantee that your personal loan application will be approved. Even if you meet all the eligibility criteria listed by a lender, the lender can still reject your application at its discretion. However, you can avoid common mistakes that lead to personal loan application rejection and follow the tips we’ve discussed to improve your chances of approval. You can also compare your personal loan options to find more lenders you may be eligible for.