Ways To Increase Your Chances Of Being Approved For A Personal Loan
Personal loans are non-guaranteed loans, which means there is no collateral that the lender can take if the borrower defaults on their payments. As a result, lenders thoroughly vet borrowers before underwriting personal loans. If you need a personal loan, here's what you can do to increase your chances of being approved for this type of loan.
Ask a Family Member to Cosign
Many people view cosigning as a final resort if they can't otherwise get approved for a personal loan, but few other tactics are as effective as having someone cosign with you on a loan. If you have a cosigner whose credit is excellent, a lender will be much more likely to approve your loan and may even offer you a lower interest rate on the loan.
Your cosigner accepts the responsibility of paying off your loan if you fail to make the necessary payments. Because this is a significant responsibility, many people who cosign are family members who want to see their loved one succeed.
Raise Your Credit Score in a Month
If you're taking out a personal loan, you probably don't want to wait indefinitely until your financial situation improves to apply for the loan. You're borrowing money, after all. You might want to wait a month if you're able to, however, so you have a chance to raise your credit score.
The three-digit number that is your credit score has a tremendous impact on what type of personal loan you can qualify for. Most lenders will check the score to determine whether you're fit to borrow, and they'll base the maximum amount of the loan and the loan's interest rate partly on this number.
A month might not seem like a long time to raise your credit score, and you certainly can do more in six months than one. Even in just 30 days, however, you might be able to significantly raise your score. Depending on your situation, you could do the following:
- Request a free copy of your credit report to check for errors that bring your score down and fix any errors that are present
- Pay your bills for another month (or a first month) entirely on time to help improve your payment history
- Make a substantial payment on debt to improve your debt-to-income ratio
Any of these will help your credit score, and all three together will have a powerful effect. It'll likely take a month for anything you do to show up on your credit report and positively impact your score.
To learn more, contact a resource like Texas Bay Credit Union.