Top 4 Tips to Get Your Personal Loan Approved



 

Looking for a way to pay off your high interest loans or credit card debt? Personal loans are the fastest growing type of loan that could help consumers save money and equally improve their credit score.

Typically, a personal loan is an unsecured loan ranging from $1,000 - $100,000, with fixed or variable interest rates. Offered by various banks and credit unions, borrowers can use personal loans for credit card debt consolidation, home improvements, medical bills or refinance their debt into a lower-interest loan with one fixed monthly payment.

"Consumers should probably consider refinancing some of their debts," said Lending Tree chief economist, Tendayi Kapfidze.

Here are top 4 tips to ensure that your personal loan gets approved for debt consolidation.

Choose a suitable lender

To increase your chance of approval, you need to search for a suitable lender — especially one based on the financial institution that is most likely to approve loan applications.

However, don’t be tempted to jump at the first ‘juicy’ offer as there are several lenders including banks and credit unions to choose from. Before making a decision, review the fine print, the interest rates and most importantly the terms of all the loans.

Choose a loan type

The secured and unsecured personal loans are the two major personal loan offerings. Therefore, start by deciding which one suits your current need.

Secured loans require that the borrower present a high-value collateral such as a house or a car, which can be claimed by the lender if payment is delayed. However, these loan types have more lenient credit requirements and you may have greater borrowing strength and lower interest rates. Though this appears quite risky, as your assets are on the line.

For unsecured loans, no collateral is required, and acceptance is based solely upon creditworthiness and the ability to repay back the loan. To get approved for this type, borrowers need to ensure that the have better credit. However, borrowers may ultimately end up with a much higher interest rate than a secured loan.

Determine how much you need

It’s important to know how much you need to borrow before applying for a personal loan. Therefore, borrowers need to calculate all existing debts that would be consolidated or refinanced.

While this information may not be required immediately, subsequently it will help in determining the requirement for the personal loan and avoid borrowers requesting for an ‘artificially’ high amount. 

Determine your credit

Ensuring you pay for things like your phone and electricity bills at the appropriate time can contribute to getting a good credit rating, as the state of your credit is a key criterion when applying for a personal loan. Checking both your credit report and your credit score is important as the stronger your credit profile and history of financial responsibility, the lower the interest rate you can expect.  Therefore, it is necessary to check your credit report annually and examine it for negative or inaccurate information that could potentially cancel out your chances of approval. Before applying for a personal loan, ensure that you do everything within your abilities to improve your credit score.

It’s important to note that errors noticed while reviewing your credit report can be disputed and removed.

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