Ever wonder how some people get approved for thousand-dollar loans when others can’t even get an application approved? Although provider does matter, whether or not you’re approved for funds depends a lot upon your finances. Lenders are looking at your financial history to determine whether you are responsible enough to borrow the cash and repay it, with interest, as agreed in the contract. You can greatly improve your chances of getting approved for a loan by doing the following
Know Eligibility Requirements
What is it that lenders are looking for? From traditional banks to installment loan direct lenders, all financial institutions are looking for applicants who have the financial means to repay the loan in a timely fashion. In order to avoid losing more money than they earn, these companies generate a list of criteria that you must meet in order to get approved. Knowing what the lender requires of you prior to completing the application can help you prepare. Though it will vary by institution and loan type, here are some of the requirements you must meet.
- Age – to borrow money, almost all lenders require you be at least 18 years of age.
- Location/address – state laws vary on loans and most lenders will require you to show proof of where you live to ensure they’re legally able to service you and that you have somewhere stable to live.
- Income – one of the most important components is your income. Lenders need to know that you have the necessary funds to pay the monthly loan amounts. This may require you to submit your pay stubs and income tax returns.
- Financial responsibilities – someone making $25,000 a year could most certainly pay back a loan of only $5,000 in a year, if they don’t have any other financial obligations. However, like most adults, there are other bills that need to be paid. Lenders will take this into consideration when factoring your income as some of it is already accounted for and can’t possibly be used to pay back a loan.
- Collateral – Some lenders require that their applicants have collateral they can use to be approved for the loan. This can be in the form of a house, a car, or a cash deposit. The collateral is used as leverage by the lender in the event that the borrower does not repay the loan as promised.
- Credit history – Here’s a big one, lenders view your credit history to determine what kind of borrower you are. If you have good credit, chances are you’ll be approved. However, if you have no or bad credit, you may have a harder time or have to pay more in interest to get approved.
Get the Funds You Need
Now that you have an idea of what lenders are looking for, how can you use this information to get approved? Here are some quick tips on how to increase your chances of loan approval.
- Review your credit report and clean up any negative ratings to boost your score.
- Apply with a lender that has eligibility requirements you can meet
- Gather all necessary financial documentation for the lender
- Don’t apply for more than you can afford to repay
- Answer the information honestly and accurately to avoid delays or rejection
- If your credit is really bad, consider a co-signer
Loans are a convenient solution to getting out of a jam or purchasing something you can’t afford upfront on your own. If you’ve been trying to get approved for a loan with no luck, perhaps you need a better understanding of what lenders are looking for. Align your financial history with those eligibility requirements and follow the application process as instructed and you should have a much better time getting the funds you need.