You never know when you'll face a financial emergency. All we can do is try our best to be prepared for such circumstances. While the smartest option is to work towards building emergency savings, it's not always the most feasible. Putting money away can be difficult, especially for individuals with tight finances. A personal loan can offer relief in an emergency situation when you have nowhere else to turn. Normally these funds can be used for almost anything and can come in handy when you need them the most. The key is knowing what it takes to get approved by a lender.
Below are 5 tips that can help you avoid getting rejected for a personal loan:
Verify Your Credit Score
Most loan providers require you to have a minimum credit score in order to qualify. If you are unsure of the credit score requirement, ask the lender before applying. Not every lender requires excellent credit. It's even possible to get a personal loan with poor credit. In any case, if you don't meet the lender's minimum requirement, it is likely you will be rejected. If you're unsure of your credit score you can check it for FREE here before you apply.
Check Income Requirement
In addition to credit score requirements, many lenders will have a minimum income requirement. This is one of the key elements lenders look at when determining eligibility for a loan. They want to be sure you have the ability to pay the borrowed funds back according to their terms. Try to avoid switching jobs and maintain a stable source of income if possible. Often lenders will consider income from various sources. Be sure to verify your type of work qualifies before applying.
Limit Your Outstanding Debt
Your debt-to-income ratio is a measure of how much you can afford to borrow. It not only shows lenders that you can pay your loan each month but also that you’re responsible with your money. A high debt-to-income ratio is negative in the eyes of lenders. It indicates that you’re using too much of your money paying off other loans. If your debt-to-income ratio is too high, generally over 40%, you may want to consider eliminating some of your debt before you apply for a new loan.
Provide Accurate Information
When you are applying for the loan, make sure to provide all details that are true to the best of your knowledge. It's important to double check your application as missing details can lead to a rejection. The lenders will cross check everything. Providing truthful, correct information is necessary when applying.
Avoid Multiple Applications
Applying for multiple loans at once could hurt your credit score because of the credit inquiries. Credit inquiries have a negative impact on your credit score thus making it more difficult to be approved for a personal loan.
Where Can I Find a Bad Credit Personal Loan
If you have found yourself in need of a loan and are unable to obtain one from traditional lenders, rest assured there is an entire industry catering to individuals with bad credit. National and community banks have the strictest standards when it comes to lending funds. Credit unions can be slightly less rigid in their loan qualification process and often have special programs for consumers with low credit scores. Also, federal credit unions have more favorable loan terms as they are restricted to charging a maximum APR of 18%. For these reasons, you’ll want to check your local credit union to see what options are available to you.
In addition to credit unions, there are copious amounts of online lenders that provide loans to individuals with less than perfect credit. Many of them boast fast funding and flexible payment plans for a wide range of loan amounts. Because there are so many options out there, it is crucial you do your research when considering online lenders as an option.