Personal loans can be great tools for paying off credit card debt, making big purchases, making home improvements or even going on your honeymoon. Although there is never a guarantee that you will get approved, you can increase your chances by following these easy steps. You can also check out Credello's recommendations for personal loans with loan offers as low as 2.4% APR.
The basics
Personal loans are typically unsecured, so you will not need to put anything up as collateral when applying. If you have good credit, you can get a lower APR, which means you will not be paying massive amounts of interest.
If you are having trouble getting approved, try the following steps:
- Look at your credit profile
- Your credit score will determine your APR, as it is a factor in how likely you are to repay your debt. Lower scores are more unlikely to repay the debt, so lenders charge higher interest rates as it is a "riskier" lending.
- To improve your credit score, make sure to make all of your payments on time, try and get your credit ratio under 30%, have a variety of accounts open and in good standing, and do not open too many accounts at one time.
- Review your reports and dispute any errors that you might find. If you notice an account that is not yours or incorrect late payments, you can dispute these mistakes and bump up your score.
- Try and get prequalified for a personal loan
- Getting prequalified lets you look at your options without impacting your credit score. You can compare different lenders before applying to ensure you get the best rates.
- Get a steady source of income
- If you have a low debt-to-income ratio, then you will be more likely to get approved. Try and lock down a good job or steady source of income to lower your ratio.
- Consider having a family member cosign or become a joint applicant
- If you cannot get approved on your own, you can get someone to cosign or become a joint applicant on the loan. They would be responsible for the loan if you were to default, so make sure that is something they are comfortable with.
Things to consider
Personal loans are a great tool for consolidating and paying off debts. You will have fixed monthly payments for the lifetime of the loan, so you can anticipate how much you will spend each month. You can also use personal loans for paying for large expenses like weddings or medical bills.
Keep in mind that you will have to pay an origination fee, which can be anywhere from 1% to 8% of the loan. For a $50,000 loan, that comes out to anywhere between $500 and $4000. If your credit score is low, it might be difficult to get approved or you might get stuck with a high APR and paying more interest than it is worth.
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Original Source: Credello: How to Increase Your Chances of Getting Approved for a Personal Loan
