Getting a loan is not easy when you have bad or no credit. However, your loan approval odds are not impossible, either.
You just need to be smart about what loan you ask for and where you go to find it. Knowing how to get a loan becomes all the more critical during emergencies when you have to make a quick decision. Fortunately, there are simple tips to follow if you don’t know how to get emergency loans without regretting later.
Moreover, if you require a personal loan and worried about facing rejection, keep reading for our best loan approval tips.
1. Ask for a Manageable Amount
Your first task is to limit the amount to only what you need – not more.
If you’re at a point on your credit journey where you still question whether the bank will approve your loan, the trick is to keep your desired loan amount low.
Asking for too much money is often a red flag.
Start with a low amount, and when you pay it off, then you can increase the amount.
2. Find a Lender Who Caters to You
Not all lenders cater to the same customers. Few of us are about to go out and ask for a loan from Goldman Sachs.
Your loan approval odds grow when you look for a lender who has requirements that match your finances.
Most lenders publish their minimum credit score requirements on their websites. However, you can also read a more nuanced perspective on finance forums and via customer reviews.
If you are in doubt, contact the lender directly. It’s better to learn more before applying for their loan products then getting an unnecessary rejection letter.
3. Add a Co-signer
Is there a co-signer willing to help you out?
If you struggled in the past and you need a loan, but your credit hasn’t yet rebounded, a co-signer can often get you past the finish line.
Keep in mind that your co-signer is on the hook if you fail to make a payment. So talk it over carefully and make sure you include them in conversations with the lender to keep everything transparent.
4. Pay Off Other Debt
If you can, pay off some other debt before applying for a loan.
A common reason for loan rejection is a high debt-to-income ratio. If you have outstanding revolving balances that eat up the majority of your income, you will struggle to get a loan.
Paying down other balances, especially on revolving debt like credit cards, will earn you brownie points with the credit bureaus and work in your favor when you apply for the loan.
On the same note, keep an eye on your credit score as you pay down debt. Paying off debt not only increases your chances of getting a loan, but it could raise your credit score, which helps you apply for better products.
Do You Know Your Loan Approval Odds?
Loans aren’t only for people with perfect credit. You can even use a loan to help improve your finances and build a better credit history.
The trick for improving your loan approval odds is to borrow smart. Don’t ask for more than you need, seek out lenders who are happy to help you, and keep on doing other things to build your credit (like paying off debt).
Image Credit: Mike Cohen.