How To Improve Chances Of Approval For Personal Loan

Personal loans provide a flexible way to fund any type of expense, especially since loan amounts can be as low as $600 and as high as $100,000. The money can be used for everything from home renovations, to debt consolidation, funeral costs, wedding expenses, surprise medical bills and car repairs, among other big-ticket items.

If you’re considering applying for a personal loan but aren’t sure if you’ll get approved, there are a few things you can do to help your chances. Below, Select details everything you need to know.

There are personal loan lenders that cater to a variety of circumstances and financial needs. For example, while you might not think you can qualify with a bad credit score, there are actually some lenders that consider applicants with low credit scores around 580 or 600.

Upstart even accepts applicants with an insufficient credit history — the company also considers those with credit scores of at least 600. At another lender, Payoff, the minimum credit score required to apply for a personal loan is 550, so you do have some options to work with.

Keep in mind that while you may be approved for a personal loan with poor credit, you will still be subject to interest rates, typically on the higher end of the lender’s range.

If debt consolidation is your main reason for pursuing a personal loan, some lenders also offer personal loans explicitly for that purpose. Marcus by Goldman Sachs even goes so far as to allow borrowers for this type of personal loan to have the funds sent directly to up to 10 creditors, which takes the hassle out of having to manually send the money yourself.

If you have poor credit, it’s best to avoid lenders that only consider applicants with good or excellent credit if you want to improve your chances of getting approved. It’s also a good idea to consider what you plan to use the loan for. Many lenders won’t allow you to use the funds for business or education expenses, for example, so don’t apply to those lenders if that is your intention.

If you’re interested in applying with lenders that require higher credit scores to receive a personal loan, you’ll need to work on improving your credit score if it doesn’t already meet the minimum.

Paying your bills on time is the most important thing you can do to help raise your score — payment history makes up 35% of your FICO® Score, making it the most influential factor when determining someone’s creditworthiness.

You should also avoid applying for multiple lines of new credit within the same time frame, which can cause a serious hit to your credit score. Every time you apply for a new credit card or a new loan, the lender runs a hard inquiry into your credit report, which “dings” your credit and can temporarily lower your score. Make sure that if you do decide to go forward with an application that it’s absolutely necessary for your finances.

It’s always a smart idea to monitor your credit report for any inaccuracies, including any instances where lines of credit were taken out in your name that you weren’t aware of. This can be a very serious issue, especially since such errors and unknown lines of credit can drag your credit score down by contributing to your utilization rate and debt-to-income ratio.

Many lenders will also consider how much money you’re applying for when they’re deciding whether or not to approve your application. While some lenders, such as SoFi and LightStream, offer loans as much as $100,000, it doesn’t mean you should necessarily apply for the maximum amount.

Before you submit your loan application, carefully consider exactly how much money you’ll need to borrow. For example, if you’re taking on a loan to consolidate your debt, calculate exactly how much debt you’ll be consolidating — otherwise, you’re just taking shots in the dark as to how much money you need to borrow.

Also remember that the more money you need to borrow, the higher your monthly payments will likely be and the more interest you’ll be charged. A high monthly payment gives you less wiggle room in your budget, and while you can sometimes opt for a longer repayment term, that also means you’ll be paying more in interest charges over the life of the loan.

A co-applicant is someone who applies for the loan with you and is equally responsible for paying back the full amount. Co-applicants are often referred to as co-borrowers and can usually be added onto your personal loan application form.

Applying with a co-applicant who has a higher credit score than you can help you get approved for a lower interest rate, and even help you gain approval where you otherwise may not have been considered. This is because it’s common for lenders to analyze your credit history, debt-to-income ratio and other credentials during the process to determine the size of the loan, interest rate and the length of your loan term.

Having a co-applicant can be helpful if you don’t have enough of a credit history under your belt to get approved for a lower interest rate. It may also help if you need to take out a larger amount of money but don’t have a steady income.

Because co-applicants have a financial responsibility to repay what’s borrowed, it makes sense for it to be someone who will also benefit from the loan. Maybe you and your spouse are finally ready to tackle that home renovation you’ve been putting off for years; in this case, you might consider having your spouse be your co-applicant. Or maybe you need more funding to take the next step with your business; if you have a business partner, this person will also benefit from the money and therefore may be willing to be your co-applicant (as long as the lender allows you to use the loan for this particular purpose). These are just some considerations you need to keep in mind when it comes to tacking on a co-applicant for a personal loan.

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