Applying for a personal bank loan is not as simple as walking into a lender’s office and completing a loan application. Banks, credit unions, and other marketplace lending companies have specific loan requirements, and they only approve applicants who meet their loan criteria. Some applicants hastily apply for financing and don’t take time to learn the basics of a personal loan. Overzealous applicants who do not familiarize themselves with a bank’s loan requirements will likely face obstacles that can stop a loan approval. Here are 4 areas to focus on when trying to maximize your chances to get approved for a personal loan.
FICO Credit Score
Applicants who apply for a personal loan before checking their credit scores or credit reports are likely to run into problems. Credit scores and credit reports play a major role in the decision process. Credit issues, such as a low credit score and late payments, can decrease an applicant’s chances of having his personal loan application approved. Banks and lending companies vary in their loan requirements — but the higher an applicant’s credit score, the better. Applicants with scores in the 660+ range have a higher chance of being approved for a loan and obtaining a favorable loan rate.
Paying off consumer debts and paying existing debts on time helps improve credit scores and opens the door to various financing opportunities. Loan applicants can order their free credit report from AnnualCreditReport.com and order their personal FICO score from Myfico.com.
Evidence of Income
Keeping accurate and thorough financial records is another key aspect of getting approved for a personal loan. Loan approvals are based on an applicant’s ability to fulfill the debt obligation. Loan applications require applicants to print their monthly or annual salary in the appropriate fields, and lenders request documentation to verify this amount. Documentation can include tax return statements, w-2’s, or 1099’s.
Collateral for a Personal Loan
There are two types of personal loans — secured and unsecured. Unsecured loans do not require collateral or security and generally necessitate an excellent credit score — 660 to 800+ range. Higher interest rates are common with unsecured personal loans due to the lack of collateral. Applicants with scores lower than 660 may not qualify for an unsecured personal loan, but they might meet the qualifications for a secured loan. This is when an applicant pledges personal property as collateral.
Examples of collateral include a car title, boat title, electronics, and other valuables. Banks assess the value of the chosen collateral before approving the loan and issuing funds. As a rule, the value of the collateral must coincide with the value of the personal loan.
Best Loan Deal
Excitement might cause an applicant to accept the first bank loan that he’s offered. This is dangerous because he could end up paying a higher interest rate, which translates into higher interest payments over the life of the personal loan. Shopping around and comparing loan offers from different lending institutions ensures the lowest rate and the best payment on the loan. Applicants should contact at least three different lenders to receive a free, no-obligation personal loan quote before deciding on a loan offer. Peerform reduce the hassles of getting your personal loan. Applying at Peerform, allow you to instantly see what you are qualified for free without any obligation.