Last year, Americans took a total of $120 billion in personal loans. And the numbers seem to be growing this year.
These loans are used for everything from debt consolidation to paying for renovations to sorting out payroll issues, and more.
While these loans are offered by multiple providers, some people still struggle getting approved. This is a real issue because the needs are often urgent. The good news is it’s possible to get approved fast if you have your house in order.
In this article about how to get approved for a loan, we’ll be looking at the important steps you need to take before thinking of taking a loan.
These will help get your personal loan applications approved faster. Remember, just because the options are available, and the requirements are less strict, doesn’t mean you’ll automatically qualify for loans.
That said, let’s get you that loan.
Fix Your Credit Rating
Some lenders will give loans to people with bad credit. While most of these loans are unsecured, there’s usually some limit to them. People with bad credit will often be approved for far less than those with good credit.
This makes sense because folks with good credit scores are considered low-risk entities. If you’re thinking of taking a loan and have some time, see if you can get your credit score back up.
Of course, this takes time but it can be done. Pay off your debts as quickly as possible. And if you have many, consider debt consolidation options. With debt consolidation, repayments are easier, and the sums, manageable.
Also, check your credit report to see if there are errors. According to an FTC report, 40 million Americans have errors in their credit reports. That’s 20 percent of the population overpaying because of higher interest rates that were caused by low credit scores.
You could be one of them. So, go see if some errors were made that resulted in a lower credit score. You can get a free credit report once a year from AnnualCreditReport.com.
If there are errors, get a reputable credit reporting agency to start the dispute process for corrections.
Ask for Reasonable Amounts
Are you working? If yes, what’s your current income? This is important because of something called the debt-to-income ratio. If you’re requesting a certain amount, your income should clearly prove that you can afford to repay the loan.
Your lender will need that information, particularly when you want a sizable loan. They’ll want to make sure that you’re earning enough to be able to repay your loans on time.
With 76 percent of all personal loan applications declined, you better make sure to ask for a reasonable amount. This is how to get approved for a loan real quick.
So, how much is reasonable? Well, never request for more than half the value of your monthly paycheck, assets or collateral. For instance, if you’re earning $6k a month or $72k a year after tax, the smart thing would be to take a $3k or $36k loan.
This will dramatically increase your loan approval odds as the lender would think you capable of repaying the loan. And if you need to take more, just make sure that the repayment terms will be easy.
Combine with a Co-Signer
If your credit scores are really low or nonexistent, you need to figure out how to get approved for a loan. A quick way to do this would be to get someone to partner with you on the loan.
Ideally, a co-signer, this person’s credit score has to be great for the loan application to go through.
However, understand that this works better when you have a fair credit score. Whatever the case, just make sure the co-signer understands the risk of doing this with you.
Job loss, life events, and disasters may occur. If this happens, the co-signer will bear the risks and pay the loans. So, have an honest discussion with them before bringing them on board.
Choose the Best Lending Institution
There are many lending options available to you today. There are lenders who prefer dealing with small business owners. There are those who specialize in personal loans.
Whether it’s cash loans, small business loans, mortgage lending or credit, there’s a lending institution for you. Find the one that best suits your need and matches your requirements. This is how to get approved for a loan quickly.
You can’t apply for SBA loans to fix personal issues. If you do, you’ll essentially be wasting your time and resources. The same goes for peer to peer lenders when you need a lot more money than they can give.
Find the lenders who are perfect for you. As a rule, avoid institutional lenders for personal loans. The rejection rate is really high. Small businesses stand a better chance of getting approved though.
Instead, seek alternative sources for your loans. There are many fintech lenders with unsecured loan limits of $10k and secured loan limits of $250k. Even better, these loans can be disbursed within 1-3 days.
Of course, the interest rates will be higher, but it compensates for the risks they assume. Some lenders borrow money to people with bad credit. There’s a wide range of lenders out there. Just find the right one for you.
Extra Tips on How to Get Approved for a Loan
While these tips on how to get approved for a loan look simple, they work really well. But if you want more, try applying for a loan with collateral. That speeds up things tremendously.
Also, consider the APR, and only choose the appropriate loan plan. Also, make sure there’s a solid reason for the loan. Your lender will most likely ask, and investigate. So, honesty is key.
For more tips on loans and financing, check out the World Inside Pictures site.