Finance

How To Apply For A Personal Loan Successfully

About 20 million Americans have a personal loan.

Personal loans are such a popular credit facility in the United States largely because lenders don’t require borrowers to provide a reason for taking out the loan. You can use the money however you wish.

However, this doesn’t mean that everyone who applies for a personal loan is approved. In 2018, for instance, 76 percent of personal loan applications were denied. So, what can you do to improve your chances of being approved?

Read on to learn how to apply for a personal loan successfully.

Know Your Credit Score

Most formal lenders such as banks and credit unions use credit scores to determine the creditworthiness of borrowers. In many cases, lenders have minim credit score requirements. They also use credit score information to determine the interest rate a certain borrower should pay on their loan when approved.

As such, it’s super important to check your credit score before you start your credit application. You have a legal right to get a free copy of your credit report every 12 months, so if you haven’t already used up this opportunity in the past year, you can get your free report at annualcreditreport.com. At a small fee, you can also get your credit report from any of the leading credit bureaus.

Once you know your credit score, you should be able to tell whether you have poor, bad, fair, good, or excellent credit.

Poor or bad credit is usually a stumbling block when you need a personal loan. So, you might be wondering “how do I fix my credit score fast?” The good news is it’s possible.

Identify a Suitable Lender

There are hundreds of thousands of companies offering personal loans. Your current bank (where you have a checking or savings account) is the go-to when you need a personal loan, but there are other options you can explore.

Banks and Saccos typically have the best loan terms, but they have the highest approval standards. If your bank requires personal loan applicants to have a credit score of at least 650, for example, your application will be rejected if your score is below that.

Researching various personal loan lenders enables you to establish their lending requirements and determine whether you meet them. Just because your bank has high standards doesn’t mean every lender has. In fact, there are many lenders offering bad credit personal loans. However, expect to find sky-high interest rates.

Proof of Income Is Essential

Good credit alone isn’t enough to secure you a personal loan. Now that lenders have established that you’re creditworthy, they want to know whether you have the income to service the loan.

Expect lenders to ask you to provide proof of income, especially if the amount you’re seeking is on the higher side. A letter of employment and/or the latest payslips will suffice if you’re formally employed. If you’re self-employed, prepare your bank statements.

That’s How to Apply for a Personal Loan Successfully

A personal loan can get you out of a financial jam. It can also provide the funds you need for things like vacations, weddings, and car repair. However, you need to know how to apply for a personal loan; otherwise, you might not get it.

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