There is no single formula for obtaining approval for a loan application. Some basic requirements such as credit score and income vary from lender to lender. Additionally, some online lenders will consider non-traditional data such as education level or free cash flow. However, all loan companies have one thing in common: they want to be paid quickly and on time. Simply put, this means that they only approve borrowers who meet their requirements.
The first thing you need to consider before applying for a loan is to make sure that your finances and credit are in order. Even with relatively low credit, there are things you can do to increase your chances of being approved for a loan. Let’s take a look at the different steps you can take to get your next loan approved.
Work with the right lender
Even with a relatively low credit score, you may still be eligible for a loan if you have chosen the right lender. There are lenders in the market who can lend smaller amounts of money to people who are rebuilding their credit. If you have chosen the unconventional route of applying for a loan, you can apply online with iCASH. The advantage of online lenders is that they offer a wide range of loan amounts if you are a potential lender with good creditworthiness. Ideally, banking institutions will automatically reject loan applicants with a credit score of less than 700. This also includes local credit unions and community banks. A great way to find a lender with flexible loan requirements is to speak with people who have been in the same situation as you. You can follow recommendations from friends or family who will point you in the right direction.
⦠Your credit score matters
In this scenario, your professional and personal credit scores play a vital role in approving a loan. Lenders use your credit history to assess how you are handling your money and how likely you are to pay off the loan. Remember: the more the credit rating, the less risk you pose to credit institutions. Start by getting your credit report from the credit reporting agencies. Ideally, these agencies provide you with reports detailing your credit score and you can use that information to improve it.
We recommend that you do this before contacting a lender. One of the best tips for improving your credit score is to update your business profiles on credit bureau websites. Plus, pay your bills on time for more than the minimum amounts owed. Again, we also recommend that you separate your personal and business expenses on different bank accounts.
Is your income stable?
Having a reliable source of income is an essential financial factor in the loan application process. Any lender you visit will need to know that you are earning enough money to pay off the loan. They will also want to assess whether your income is coming from a reliable source, such as a business or a stable job. One of the things you don’t want lenders to see is a massive drop in your income or a job change just before applying for a loan. This gives a lender a bad image, and they may be skeptical of you. We recommend that you try to keep your work situation the same in the months before taking out a loan. This shows the lender that you are a responsible borrower who can cover the cost of repaying the funds quickly and on time.
⦠Keep the loan term short
In many cases, long term loans pose a significant risk to a lender. This is because the more time you have to repay the loan, the more likely it is that something will go wrong. If, through unfortunate circumstances, something goes wrong, it prevents you from making your payments. Plus, a long-term loan means the lender takes longer to get their money back.
We have to point out that the lender also charges more interest in this case, so this is a win-win situation. For the borrower, the advantage of a long term loan is that the monthly payments will be low. However, you should know that these loans are difficult to obtain. They tend to be much more expensive in the long run since you are paying interest over a longer period. We recommend that you go with the shortest loan term you can afford.
As you have seen, there are many ways to increase the chances that you will be approved for a loan. We recommend that you start working on these steps today if you plan to borrow a loan soon or soon. In the long run, you will increase your chances of hearing “approved†from a lender of your choice. To you !
