How to Improve the Chances of Approval for a Personal Loan

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Personal loans offer a flexible way to finance any type of expense, especially since loan amounts can be as low as $600 and as high as $100,000. The money can be used for everything from home renovations and debt consolidation, to funeral costs, wedding expenses, surprise medical bills and car repairs, among other big-ticket items.

If you’re considering applying for a personal loan but aren’t sure if you’ll be approved, there are things you can do to improve your chances. Below, Select details everything you need to know.

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1. Find a lender that meets your financial needs

There are personal lenders that cater to a variety of circumstances and financial needs. For example, although you may not think you qualify with a bad credit, some lenders actually consider applicants with a low credit score around 580 or 600.

Reached even accepts applicants with poor credit history – the company also considers those with credit scores of at least 600. At another lender, Paythe minimum credit score required to apply for a personal loan is 550, so you have a few options to work with.

Beginner personal loans

  • Annual Percentage Rate (APR)

  • Purpose of the loan

    Debt consolidation, credit card refinancing, marriage, moving or medical

  • Loan amounts

  • Terms

  • Credit needed

    FICO or Vantage score of 600 (but will accept applicants whose credit history is so poor that they have no credit score)

  • Assembly costs

    0% to 8% of target amount

  • Prepayment penalty

  • Late charge

    Greater of 5% of monthly amount past due or $15

Repayment of personal loans

  • Annual Percentage Rate (APR)

  • Purpose of the loan

    Debt consolidation/refinancing

  • Loan amounts

  • Terms

  • Credit needed

  • Assembly costs

    0% to 5% (based on credit score and application)

  • Prepayment penalty

  • Late charge

    5% of the monthly payment amount or $15, whichever is greater (with a 15-day grace period)

Keep in mind that even though you may be approved for a personal loan with poor credit, you will still be subject to interest rates, usually at the higher end of the lender’s range.

If debt consolidation is your main reason for applying for a personal loan, some lenders also offer personal loans explicitly for this purpose. Marcus of Goldman Sachs even goes so far as to allow borrowers of this type of personal loan to have the funds sent directly to up to 10 creditors, eliminating the need to manually send the money yourself.

Marcus by Goldman Sachs Personal Loans

  • Annual Percentage Rate (APR)

    6.99% to 19.99% APR when you sign up for autopay

  • Purpose of the loan

    Debt consolidation, home improvement, wedding, moving and moving or vacation

  • Loan amounts

  • Terms

  • Credit needed

  • Assembly costs

  • Prepayment penalty

  • Late charge

If you have bad credit, it’s best to avoid lenders who only consider applicants with good or excellent credit if you want to improve your chances of being approved. It’s also a good idea to think about how you plan to use the loan. Many lenders will not allow you to use the funds for work or education expenses, for example, so do not apply to these lenders if that is your intention.

2. Increase your credit score

If you are interested in applying with lenders who require higher credit scores to receive a personal loan, you will need to work on improving your credit score if it is not already at the minimum.

Paying your bills on time is the single most important thing you can do to increase your score – payment history accounts for 35% of your FICO® score, making it the single most influential factor in determining a company’s creditworthiness. nobody.

You should also avoid applying for multiple new lines of credit at the same time, which can seriously hurt your credit score. Every time you apply for a new credit card or loan, the lender does a thorough investigation of your credit report, which “rings” your credit and can temporarily lower your score. Make sure that if you decide to go ahead with a request, it is absolutely necessary for your finances.

It’s always a good idea to monitor your credit report for any inaccuracies, including instances where lines of credit have been taken out in your name that you weren’t aware of. This can be a very serious problem, especially since such errors and unknown lines of credit can lower your credit score by contributing to your utilization rate and debt ratio.

3. Don’t ask for more than you need

Many lenders will also consider the amount you request when deciding whether or not to approve your request. While some lenders, like SoFi and LightStreamoffer loans up to $100,000, it doesn’t mean you have to ask for the maximum amount.

Before submitting your loan application, think carefully about the exact amount you will need to borrow. For example, if you take out a loan to consolidate your debt, calculate exactly how much debt you will consolidate. Otherwise, you’re just taking pictures in the dark to figure out how much money you need to borrow.

Also remember that the more money you need to borrow, the higher your monthly payments will be and the more interest you will have to pay. A high monthly payment gives you less wiggle room in your budget, and while you can sometimes opt for a longer repayment term, it also means you’ll pay more interest over the life of the loan.

4. Apply with a co-applicant

A the co-applicant is a person who applies for the loan with you and is also responsible for repaying the full amount. Co-applicants are often referred to as co-borrowers and can usually be added to your personal loan application form.

Applying with a co-applicant who has a higher credit score than yours can help you get approved for a lower interest rate, and even help you get approved where you might not have. otherwise taken into account. Indeed, it is common for lenders to analyze your credit history, debt-to-equity ratio, and other identifying information during the process to determine the loan amount, interest rate, and term of your loan. .

Having a co-applicant can be helpful if you don’t have enough credit history to get approved for a lower interest rate. It can also be useful if you need to withdraw a larger amount of money but don’t have a stable income.

Since co-applicants have the financial responsibility to repay what is borrowed, it makes sense that someone will also benefit from the loan. Maybe you and your spouse are finally ready to tackle that home renovation you’ve been putting off for years; in this case, you might consider having your spouse as your co-applicant. Or maybe you need more funding to take the next step with your business; if you have a business partner, that person will also benefit from the money and may therefore agree to be your co-applicant (provided the lender allows you to use the loan for that particular purpose). These are just a few considerations you should keep in mind when it comes to firing a co-applicant for a personal loan.

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Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff alone and have not been reviewed, endorsed or otherwise endorsed by any third party.

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