Let’s start by clarifying the exact nature of your loan. There are two broad categories: secured and unsecured. This relates to whether or not your loan has collateral; the former is less risky and more enticing for lenders. Unsecured loans are more difficult to get so you need to be hitting higher in the different categories we will be mentioning below to get your loan approved. It goes without saying that without collateral there will be higher interest rates. Now, onto the tips and tricks of securing your personal loan.
Are you really surprised? We have to discuss the most obvious indicator of your borrowing potential which is a record of your previous history in such matters. Rejected applications significantly drop this rating and will instantly make the already conservative banks even more cautious. So, steer clear of loans that will be unlikely to be approved: they will hurt your chances in the long run. Another tip is to have a look at your credit rating and its statements annually. You never know what transactional and recording errors might creep in and topple your credit score.
Everything else is pretty straightforward, pay bills on time, make sure your debt to income ratio is as healthy as possible and keep on top of those credit card payments.
If you weren’t aware, credit ratings are extremely sensitive. Something as simple as applying for too many loans will lower your score. This can be really annoying because it’s a catch-22 where there’s no way to know until you’ve applied for a loan whether it’s been successful. Or is there?
Eligibility calculators leave no footprint and protect your credit score. This allows you to shop around without pinching those valuable points that you need in order to bolster your chances of getting said loan. However, they’re not the be-all and end-all. Although fairly accurate they are only an estimate of loan approval success. There are many available online but the more detailed the initial questionnaire the less deviation from standard banking practices.
Know where to go
If you’re looking at a credit rating that’s below 640, it’s unlikely that you’re going to get approved by major brick-and-mortar banking institutions; not at a reasonable interest rate anyways. However, be aware that belonging to this group of borrowers can make you vulnerable to companies offering payday loans. It is advisable to stay out of the turbulent and expensive cycle of short term loans that don’t even require a credit check. If a day ever comes where you wish to get a more substantial loan, such as for a car or mortgage, your credit score will be in tatters.
There are reputable financiers online just stay clear of those that don’t do a credit check. Make sure you avoid any loans that require an advance payment and be sure to do a search for the company on the Better Business Bureau database. Getting a loan from online lenders that are accredited and rated highly on the BBB really helps to bring peace of mind in your transaction.
Even if your credit rating is good, I’d recommend at least searching at the rates to be found in the online loan market. The APR is often much more favorable and approval rates are higher.
Honesty is the best policy
If even a whiff of suspicious or conflicting information is provided in the loan application the matter is researched further. Lying when applying for a loan is fraud, simple as. If your loan becomes approved and is then caught for misrepresentation your lenders may demand immediate repayment.
It can be all too enticing to shift your income higher to get that debt-to-income ratio a bit healthier. Likewise, undeclared spouse, children or debt may make your approval better on paper but the consequences of fraud can go as far as imprisonment. There are few out there with so many black marks in their credit rating that they cannot find anywhere to secure a loan. Your APR may be higher by telling the truth but I think you’ll agree that it’s better to part with those extra few bucks and staying on the straight and narrow than breaking the law.
I’m not surprised that people who experience bankruptcy are often dubious of their chances of ever getting a reasonable interest rate on a loan. However, the cliche “time heals all things” is very relevant to this situation. Get back on the wagon, budget tightly and keep checking in with your credit rating. It takes six years for this particular mark to be wiped from your credit statements.
Use your credit card to make small, manageable payments which you can comfortably pay off each month. This is relevant not just to those who are bankrupt but anyone suffering with a bad credit rating. Avoiding purchasing on credit is safe but it’s actually the process of managing credit that jolts your credit rating higher. Just be sure to pay off the interest in full each month so you stay on the 0% interest rate. Once the time comes for you to take out a loan your credit rating will be well on the road to recovery.
A Final Note
Suffice to say there’s a lot of factors to consider when taking out a loan. These are just the main points to address. The lending market is saturated and it’s very easy to become overwhelmed by all the information floating around. It is a basic enough concept though; if you’re looking to get a loan that is both fair in its repayment requirements, safe and credible then you have to look after your finances. It’s something you should keep on top of your whole life. You never know when you’ll need to take out a loan and if you’re always on even keel then you’ll maintain a covetable credit rating.
One thing I’d like to depart with is to evaluate your needs. Once you’ve done this and pared your loan amount down to its bare essentials it’s important to stick to it. Being realistic in your application is the key to both getting a loan approved but also preventing any unnecessarily prolonged repayments.