Introduction
It is always stressful when going for a loan especially when you are not well conversant on what the various lenders consider key when approving loans. Whether you’re asking for a bad credit personal loan, payday loan or any other type of financing, there are a few criteria that the lenders will consider when issuing you credit. The good news is that not only is there clarity on the key criteria, but it is also possible to improve your application, which means getting closer to a ‘yes’. In this article, we will give tips on how you can increase your chances of getting a loan with Larvin Advance Loans or any other loan company.
- Check Your Credit Score and How You Can Try and Bump it Up
Credit score is one of the major features in the assessment of your loan application among the lenders out there. This is even more important as it shows your ability to service the credit and your credit history. Having a good credit score, simply implies that an individual will get lower interest rates for a loan as well as the probability of getting the loan.
- Check your credit report:
Common credit reporting agencies which you need to get a copy of before you apply for a loan.
- Improve your credit:
What you need to do is pay the existing credit better, ensure you meet payment obligations in time, and work towards maintaining lower credit utilization ratios. All these actions can serve in improving your score in future.
- Understand the loan requirements
Self-employment is not as favorable in the eyes of the lenders as you must be able to prove that you are capable of making income toward paying the loan. The fact of having a stable work for a certain period means that this person or client is financially secure.
- Maintain stable employment:
Avoid changing jobs frequently, especially if you’re planning to apply for a loan soon. Lenders prefer applicants who have been in their current position for at least six months to a year.
- Show proof of income:
Be prepared to provide recent pay stubs or bank statements that demonstrate a consistent income. Self-employed applicants may need to provide tax returns or profit-and-loss statements to verify income.
- Reduce Your Debt-to-Income Ratio
Your debt-to-income ratio is a key factor lenders consider when evaluating your loan application. A high DTI ratio means that a large portion of your income is already committed to paying off existing debts, which could make it harder for you to take on additional loans.
- Pay down existing debt:
Reducing your outstanding debt before applying for a loan can significantly improve your DTI ratio, increasing your chances of approval.
- Increase your income:
If possible, look for ways to increase your income through a side job or freelance work. This will not only lower your DTI ratio but also show lenders that you have a greater capacity to repay the loan.
- Apply for the Right Loan Amount
Borrowing more than you can realistically repay is a red flag to lenders. Requesting a loan amount that’s in line with your income and ability to repay increases the likelihood of approval.
- Borrow what you need:
Avoid requesting a loan amount that’s larger than necessary. Lenders are more likely to approve loans that seem reasonable based on your financial situation.
- Use a loan calculator:
Estimate your monthly payments using a loan calculator to ensure you can comfortably manage the repayments.
- Consider a Co-Signer
If you have a low credit score or limited credit history, applying with a co-signer can improve your chances of loan approval. A co-signer is someone with a better credit profile who agrees to take responsibility for the loan if you’re unable to make payments.
- Choose a trusted co-signer:
This could be a family member or close friend who has a strong credit score and stable financial situation.
- Understand the risks:
Both you and your co-signer are equally responsible for repaying the loan. If you miss payments, it will negatively impact both of your credit scores.
- Provide Accurate and Complete Documentation
Submitting incomplete or inaccurate information on your loan application can result in delays or even a rejection. Lenders need all the necessary documentation to assess your ability to repay the loan.
- Double-check your application:
Ensure that your loan application is filled out completely and accurately. This includes your personal information, employment details, and financial data.
- Have supporting documents ready:
Be prepared to submit supporting documents, such as pay stubs, tax returns, and proof of residence. Having these documents readily available can speed up the approval process.
- Limit the Number of Loan Applications
Submitting multiple loan applications within a short period can hurt your credit score. Each time you apply for a loan, the lender performs a hard inquiry on your credit, which can temporarily lower your score.
- Be selective:
Instead of applying for several loans at once, research lenders carefully and apply only to those you’re most likely to qualify for.
- Pre-qualification:
Some lenders offer a pre-qualification process that allows you to check your eligibility without affecting your credit score. This can help you gauge your chances of approval before submitting a formal application.
- Be Honest About Your Financial Situation
It may be tempting to exaggerate your income or omit details about your debts, but honesty is crucial when applying for a loan. Lenders verify the information you provide, and any discrepancies could result in your application being denied.
- Be transparent:
Accurately report your income, debts, and financial obligations. If you’re honest from the start, you’re more likely to build trust with the lender and increase your chances of approval.
- Address past financial mistakes:
If you’ve had financial challenges in the past, such as late payments or defaults, be upfront with the lender and explain how you’ve improved your financial situation.
Bottom Line
Improving your chances of loan approval is about preparation and understanding what lenders look for. By taking steps such as improving your credit score, maintaining stable employment, reducing your debt-to-income ratio, and applying for the right loan amount, you can significantly increase your likelihood of securing the financing you need. At Larvin Advance Loans, we encourage borrowers to make informed decisions and provide the best possible application to increase their chances of approval.