Getting a personal loan approved may be challenging if you don’t know which steps to take. The fact is, we all may be in need of a personal loan from time to time in our lives. Whether you need money to meet basic expenses, or a little boost to fund your upcoming wedding or vacation, you’ve probably considered the vitality of one.
With personal loans, you don’t have to put up any collateral, like your house or your car, leaving the lender with no guarantee for the loan other than your own reputation. As such, these kinds of loans are difficult to secure, and even harder to secure with a competitive interest rate.
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Tips for Getting a Personal Loan Approved
If you’re worried about getting a personal loan approved at a rate that works for your budget, here are the top 4 tips for getting it approved the first time:
1. Determine The Loan Type
When people talk about personal loans, they are generally referring to an unsecured, close-end installment loan, though it’s worth noting that the likes of auto loans, mortgages, and payday loans are also personal loans. Make sure you take some time to identify if you are applying for an installment loan as opposed to a business loan. If a lender isn’t satisfied with your credit score, they may offer you a secured loan option instead, which means collateral is up for the taking. Be sure to read all fine print.
2. Credit Score Checks
Don’t set out and apply for loans that your credit score clearly doesn’t qualify for, even if you’re feeling lucky. Each time you apply for credit, it’s reported on the credit report, meaning your credit score takes a small hit. When an application is rejected, the damage doubles, taking another hit on your credit score. If you’re tired of working with a lackluster credit score, be sure to request a credit report for free at least once per year and double check all entries and inaccuracies that may be contributing to a lower score than you deserve.
After you’ve done your homework, ask your lender before applying what guidelines are followed when assessing loan applications.
3. Credit Score Improvements
Naturally, the best way to get a loan that you want is to have a good credit score. Your credit score is not set in stone, thankfully, which means you can take steps to get the credit score you want before applying for a personal loan. You can improve your credit score by making sure you are always paying on time and reducing your debt-to-available credit ratio as much as possible. If you are late with a payment, wait 6-months for its effect on your report to dwindle. That way, your personal loan rejection likeliness will decrease.
4. Vet Lenders
Thankfully for you, there are a lot of lenders out there today. That means if you are patient and do your due diligence, you can pair up with a lender that is right for your credit score and loan requirements. Even if your credit score limits your options, there are types of lenders that specialize in high-risk borrowers who would be happy to do business with you. If possible, avoid short-term payday lenders at all costs, and always be sure to read the fine print before signing anything.
Now is the time to get started learning more about the personal loan type, proper lender, and credit repair you need to pursue this year.
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