Getting approved for a loan application may not be a cakewalk anymore. Lenders are applying stricter criteria for approvals in the current economic difficulties caused by the pandemic. In contrast, people’s financial needs are increasing.
The need for additional funds can be caused by anything; You may need to pay your children’s college tuition, make urgent home or property repairs, consolidate debt, buy vehicles or appliances, etc. In some of these situations, there may be an urgent need for funds, but lenders may reject your funding application for some reason.
Here are some tips to ensure your loan application is approved quickly.
Do not apply for a loan without thoroughly reviewing the lender’s eligibility criteria.
It is necessary to go through the eligibility criteria before applying for a loan. Sometimes the lender may have criteria that you may not fit; In such a scenario, there is a chance that your loan will be rejected. This harms your credit score as each request is treated as a credit request and recorded on your credit report. This lowers your credit score, which can prove to be a hurdle to future loan approvals.
Check Experian’s credit history before applying for credit.
The Experian credit-worthiness is a three-digit number between 300 and 900 that reflects your creditworthiness based on your income, wealth, previous loans, repayment history, etc. Each lender has different criteria for creditworthiness. Therefore, it is necessary to check your creditworthiness before applying for a loan. A credit score above 700 is considered good, and generally all lenders accept this score.
Do not submit loan applications to several lenders at the same time.
Any lender can learn about your current loan application. If you have applied for multiple loans, you give the impression that you lack the confidence and ability to repay the loan. In addition, multiple applications increase the probability of multiple rejections. This can affect your credit score which defines your creditworthiness. Therefore, research about different lenders in the market, their eligibility criteria, interest rates, loan application process, and repayment terms. Finally, submit a loan application to the lender that best suits your needs and eligibility.
Correct the mistakes in your credit report
You can review your Experian credit report once a year for free. You can pay for the credit report at any time. The report may contain errors and omissions. Try to fix these mistakes by taking the right actions to improve your credit score. The lower the number of errors in the Schufa, the greater the chances of a personal loan approval.
Avoid reapplying for a loan before six months after it has been rejected.
If your loan application is denied, do not immediately apply for another loan if you do not have sufficient eligibility. If time permits, consider spending at least six months improving your credit score and history instead. Proper research on lender eligibility criteria will lead you to a path to improving your credit score and being eligible for the funds you need.
Suppose you apply for a loan shortly after being denied without properly researching or building your eligibility will result in a further drop in your credit score. This can ultimately affect the status of any subsequent credit you apply for.
Pay off your old debts before applying for a new personal loan
Recurring outstanding debt directly lowers your credit score. Therefore, it is advisable to clear any debt, be it in the form of outstanding secured or unsecured loan repayments, outstanding bills, etc. before applying for a new loan. Paying off the debt increases the chances that the loan will be approved. Pay off your debts on time according to the terms of the lenders. This increases the likelihood of a future loan approval.
Plan the repayment before applying
Avoid skipping this step before applying for a loan. Don’t apply for a loan with interest rates and EMI that may be unmanageable and put pressure on your cash flow. Missing payments further impacts your credit history. Any delay in repayments can have a negative impact on your profile as a borrower. This, in turn, can lead to the rejection of future loan applications that you make to meet your financial needs.
Avoid making mistakes when applying for a loan.
Provide correct personal information and any required or requested documents in the personal loan application before submitting it to the lender. If the lender finds missing or incorrect information, they may reject your loan application. So don’t rush to fill out the application form, because denial of a loan can also prove to be a hurdle for the approval of further loans in the future.
Provide accurate information about your income and expenses
Don’t hide your income and expenses while filling out a loan application. Remember that the lender can access your bank transactions, previously drawn loans, assets, IT earnings, etc. through your credit profile. Additionally, each document you upload has specific originality signs and symbols that lenders can quickly identify. Incorrect information and uploading duplicates will result in your application being rejected.
Choose the loan specifications so that the EMI does not exceed 30% of your monthly income
Lenders always assess applicants’ ability to repay before approving the loan. Make sure your outstanding and new loan EMIs do not exceed 30% of your income. For example, if you have a monthly income of Rs. 90,000, then opt for the EMIs that add no more than Rs. 27,000. This is an important tip to get yours private loan approved.
Although personal loans are your helpers in financial emergencies, you must consider every aspect before applying or availing a loan. Follow the tips above to ensure your application is approved in one go.
Most importantly, you should never be in a hurry when applying for a personal loan.
Read the terms and conditions and every little detail of the loan agreement carefully. This will help you make an informed choice and decision and increase the chances of approval.