Editor's choice: Credible Personal Loans
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Meeting a lender’s basic requirements like credit score and income cutoffs are key to getting approved for a loan. But taking steps like limiting the number of loan applications and double-checking your information can also help your chances of ending up in the yes pile.
Just keep in mind that no application is guaranteed to get approved — even if you’re preapproved.
The best defense against personal loan rejection is to know what it takes to be approved by a lender. These seven tips should help increase your chances of getting that approval notice.
Your credit is one of the main factors lenders consider when you apply for a loan, especially an unsecured personal loan. Each has its own minimum you must meet in order to qualify.
Not every lender requires excellent credit. But even if you have strong credit, if you don’t meet the lender’s requirement you will likely be rejected outright. If you’re unsure your credit score or history qualifies, ask the lender before you apply.
Many lenders also have a minimum income requirement. This may not be listed on the lender’s website, so you could have to do some digging — either by calling the lender directly or browsing one of our review pages.
Like your credit, this is one of the things many lenders consider necessary. After all, if you don’t have the income to pay back your loan, you can’t afford to borrow.
Lenders generally consider income of various sources, but not always. Sometimes freelance work, benefits or child support payments won’t cut it.
A lender may require you to have been employed by a company for a certain number or years, or that you receive your income through direct deposit.
Some loans — especially those from banks — require you to provide collateral in order to borrow. This can take the form of a piece of property, or it can simply be a source of liquid money that your lender can use in case you default.
You risk losing collateral if you default. But it lowers the risk the lender faces and can help you qualify or get better rates and terms.
Your debt-to-income (DTI) ratio, like your income, is a measure of how much you can afford to borrow. It not only shows lenders that you can pay your loan each month, but also that you’re responsible with your money.
A high DTI indicates that you’re using too much of your money paying off other loans. You might want to pay off some of your debts first if your DTI is over 43%.
Although personal loans are open and can be used for a number of things, not every lender allows your loan to be used for just anything. For example, you may not be able to use your loan funds for secondary education expenses or your business. Check with your lender to make sure you can apply your funds to whatever you need.
Before you hit submit, double-check your application. Missing even small details could result in a rejection. If a lender can’t verify your details, it won’t be able to offer you a 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.
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