6 Tips to Get Approved For a Personal Loan

When you’re looking for a personal loan, it can seem like the odds are stacked against you. Many lenders require applicants to have high credit scores, steady incomes, and liquid assets (such as investments or savings) as collateral to qualify for a loan. But don’t let that deter you from pursuing your loan goals! 

There are so many different factors that go into determining whether or not an applicant is eligible for a personal loan; if your lender requires any of the following criteria, there are ways to make sure you meet their standards: Avoiding these pitfalls will help increase your chances of getting approved when applying for a personal loan. 

Here are six tips for getting approved for personal loans.

#1 Have a strong credit score

Your credit score is one of the first things a lender will look at when evaluating whether or not to approve your application for a personal loan. That’s because your credit score is used to predict how likely you are to repay your loan based on your financial history. If you have a high credit score, you’re more likely to be approved for a loan at a lower interest rate. 

If your credit score is low, you might be approved for a loan, but you may be required to pay a higher interest rate and/or put up more collateral. If your credit score is below what the lender requires, you may want to consider taking action to boost your credit score first before applying for a loan. 

#2 Check your current offers.

If you’re contacting one lender for an estimate, it may be worthwhile to check your credit reports with one or two other companies to see if they offer better rates. You can do that for free through AnnualCreditReport.com. Just be sure to check your reports with the three major credit reporting agencies — Experian, TransUnion, and Equifax — to make sure there are no errors. 

If there are, you can dispute them and get them removed. Be careful, though: Don’t apply for multiple loans at once. If you apply for multiple loans at once, some lenders may view that as a red flag since it indicates you’re desperate for money.

#3 Establish eligibility.

If you’re applying for a personal loan, the lender may ask for proof that you’re able to repay the loan. One way to do this is to show that you have a sufficient amount of income coming in each month — or that you have sufficient assets that you could liquidate. 

Calculate how much income you’ll need to pay back your loan each month and make sure you have that amount readily available in one or more of your bank accounts.

#4 Be honest about your income and assets.

If you’re applying for a personal loan, be honest about the amount of money you earn and what assets you have that you could use as collateral. If a lender discovers that you falsified information on your loan application, they could report you to a credit bureau. This would negatively impact your credit score and make it even more challenging to get a loan in the future.

#5 Provide a sound reason for borrowing.

Lenders want to know why you need the money, but they also want to know that you’re going to repay it. In other words, you want to provide a sound reason for borrowing. If you’re applying for a business loan, for example, you might want to provide a business plan or financial model. If you’re applying for a personal loan, you might want to provide a budget and outline how you expect to repay the loan.

#6 Be prepared to pledge an asset.

If your credit score is low, you may want to consider pledging an asset as collateral for your loan. This will lower your interest rate on your loan, but it also means that you’ll have to pay a fee if you default on your loan. 

This fee is known as a “loan assumption fee,” and it’s usually equal to 10% of the value of the collateral. If you need to pledge an asset, make sure you’re comfortable with the possibility of losing the money.

Conclusion

When you’re looking for a personal loan, it can seem like the odds are stacked against you. Many lenders require applicants to have high credit scores, steady incomes, and liquid assets (such as investments or savings) as collateral to qualify for a loan. 

There are so many different factors that go into determining whether or not an applicant is eligible for a personal loan; if your lender requires any of the following criteria, there are ways to ensure you meet their standards. If you meet these criteria, you’re sure to get approved for a personal loan!