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It’s well known that lenders consider your credit score, income and financial stability when assessing your eligibility for a personal loan. However, hidden behind these obvious considerations are a number of tricks of the trade that lenders know about — and you should too.
Get the scoop on four insider secrets to consider when comparing personal loans.
1. Rates aren’t everything
The interest rate of a personal loan is only the beginning and may not actually give you a full picture of what your loan costs. The Annual Percentage Rate (APR) gives you a better idea of the total cost of your loan, but keep in mind that penalty fees for things like early payoff or late payments usually aren’t included in the APR. If you suspect that you’ll pay off your loan early, consider looking for a loan with no prepayment penalties.
The loan term can be just as important when it comes to the monthly and total cost of your loan. That’s because interest is a cost that accrues over time. A long term reduces your monthly payments but can make your loan significantly more expensive.
A personal loan calculator is a great tool to help you visualize how much your loan could cost. You can put in different values to compare costs and decide what loan amount and terms you can ultimately afford.
2. Lenders consider personal factors
Where you are in life can often a play a part in whether you are approved or not. It can be difficult for someone who’s younger or much older — say, an 18-year-old or a retiree — to find a personal loan. This is because lenders prefer to work with financially stable borrowers who are employed full-time and have several years of positive credit history behind them.
3. Your credit score and credit history both affect your application
Your credit score is a three-digit number that lenders use to get a snapshot of your financial strength. But it’s not the only credit-related factor that lenders consider when you apply for a loan.
For a more in depth look at your needs, lenders also consider your credit history. This is a detailed record of relevant transactions, including open credit accounts, recent inquiries, bankruptcies, defaults and more. Repairing an imperfect credit report can be more difficult than improving your credit score, but both are important.
Did you know?
You can easily get your credit reports and credit score online.
4. A computer bot could approve or deny your application
Sometimes your application might be declined by a “robot” without a human ever setting eyes on it. This is often more common with online lenders, because it’s one of the ways they can offer fast approval — sometimes within the hour.
Banks and lenders often use their own algorithms to check loan applications, automatically sorting the low-risk applications from the high-risk applications to preapprove strong applicants. It can be a way of weeding out prospective borrowers who don’t meet the initial eligibility criteria. If you’re considering applying with a lender that offers preapproval, it’s often worth reviewing their eligibility requirements to avoid wasting time and on applications that go nowhere.
Quick recap: Four personal loan secrets you need to know
1. Rates aren’t everything 2. Lenders may consider personal factors 3. Your credit score and credit history both affect your application 4. A computer bot could approve or deny your application
We update our data regularly, but information can change between updates. Confirm details with the provider you’re interested in before making a decision.
Knowing all the industry tricks inside and out will be of limited help if you’re not choosing the loan that’s the right fit for you. To get the most out of your financing, start by comparing your loan options to find the best one for you.
Anna Serio is a lead editor at Finder, specializing in consumer and business financing. A trusted lending expert and former certified commercial loan officer, Anna's written and edited more than 1,000 articles on Finder to help Americans strengthen their financial literacy. Her expertise and analysis on personal, student, business and car loans has been featured in publications like Business Insider, CNBC and Nasdaq, and has appeared on NBC and KADN. Anna holds an MA in Middle Eastern studies from the American University of Beirut and a BA in Creative Writing from Macaulay Honors College at Hunter College, CUNY.
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Working overseas for 6 months….moving back to the US next week. Loan application was refused because the last 6 months the pay was in euros! That was the ONLY reason given by the bank. Is this normal??
Thanks for your inquiry. Please note that we are not affiliated with any company we feature on our site and so we can only offer you general advice.
Generally, banks are more strict when it comes to loan eligibility requirements. You’ll have to meet standard lending requirements regarding your income, asset position, credit history, and your overall capacity to pay back the loan.
You may have better chances if you apply with private lenders. You can compare personal loans online to help you find lenders that offer the type of loan you need and eligibility requirements you can meet.
Before applying for any loan, please check if you are able to meet all the eligibility criteria and review the terms and conditions to see whether it is right for you.
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Working overseas for 6 months….moving back to the US next week. Loan application was refused because the last 6 months the pay was in euros! That was the ONLY reason given by the bank. Is this normal??
Hi Matthew,
Thanks for your inquiry. Please note that we are not affiliated with any company we feature on our site and so we can only offer you general advice.
Generally, banks are more strict when it comes to loan eligibility requirements. You’ll have to meet standard lending requirements regarding your income, asset position, credit history, and your overall capacity to pay back the loan.
You may have better chances if you apply with private lenders. You can compare personal loans online to help you find lenders that offer the type of loan you need and eligibility requirements you can meet.
Before applying for any loan, please check if you are able to meet all the eligibility criteria and review the terms and conditions to see whether it is right for you.
Best regards,
Rench