8 How Do You Apply for a Loan Tips That Will Skyrocket Your Chances of Approval

how do you apply for a loan

Applying for a Loan Approved, Loan application form with a pen on a desk with an approved stamp

Personal loan applications are often rejected for reasons of bad credit and self-employment. However, that doesn’t mean you should fear to apply for a loan.

You can use a personal loan to pay off credit card debts or an emergency medical bill. Whatever the case, you could be struggling to pay off your debts.

You may be wondering how you can apply for a loan. Luckily, there are a few ways you can improve your chances of getting approved for a personal loan.

How do you apply for a loan? If you find yourself asking this question, keep reading. These tips will help you increase your chances at approval.

1. Apply with Multiple Lenders

Each lending institution has its own requirements for loan approval. Different institutions may be able to offer you different lending terms.

It doesn’t hurt to apply for personal loans from multiple institutions. You may be wondering if this will affect your credit score. The answer is simple yet complicated.

Credit inquiries account for 10% of your credit score. Each one will slightly impact your score.

However, different scoring models approach rate shopping in different ways. Most will count each inquiry made within a certain window of time as one inquiry. This window ranges from 15 to 45 days.

This will depend on the scoring model used to check your credit score.

When you apply for loans from multiple institutions, you can compare rates and terms.

2. Choosing a Lender

Different types of lending institutions may offer better terms and interest rates. Check with different banks in your area.

If you have access to a credit union, you may wish to get a loan with them Credit unions often have less strict requirements for personal loans. Some offer loans for people with poor credit.

You can also try online lenders. These institutions don’t have the same overhead costs as traditional financial institutions.

They may offer better rates.

3. An Approved Purpose

People use personal loans for a variety of different reasons. One of the most common uses for personal loans is credit card debt consolidation.

Not all personal loans can be used for anything. You should check with the lending institution to make sure your purpose is approved.

4. Check Requirements Before Applying

Before you apply for a loan, make sure you check the requirements. If you won’t meet income or credit requirements, there’s no sense in applying.

Apply only for loans you could get approval for.

Some lenders have stricter requirements than others. If you don’t meet the credit or income requirements, you could be rejected outright.

You may not be able to find this information on a lender’s website. You may need to contact the lender directly. You can speak to a loan officer and find out if you may qualify.

Some online lenders don’t require a credit check. These income based loans can be a great option for those with bad or minimal credit history.

5. Consider Adding a Cosigner

If you have poor or limited credit, you may have better luck by adding a cosigner to your loan. This person should be someone close to you who you can trust.

The lender will use information from both your credit reports to determine interest rates and terms. Adding a cosigner to your loan can help you secure a lower interest rate.

If you do this, you need to be careful. Your cosigner takes on equal responsibility for the loan.

If you miss any payments or default on the loan, it will impact your cosigner’s credit in addition to your own. You could also ruin your relationship with the cosigner.

Check with the lender to make sure they allow cosigners. Not all lending institutions do.

6. Secured Personal Loans

You may have trouble getting approved for a personal loan. You could consider a secured loan.

This type of loan is secured by collateral. This means you borrow money against some asset you own. This could be your home, car, or even investment accounts.

Because the loan is secured with an asset, you’re seen as less of a risk. You can get more favorable terms and lower interest rates on these types of loans.

If you fail to pay back the loan, the lending institution will take possession of the asset.

7. Choose a Variable Rate

You may have the option to choose between a variable and fixed rate. A fixed rate will never change over the course of the loan term.

However, a fixed rate may start out higher than a variable rate. If you are looking for a short-term loan, you may benefit from a variable rate.

The interest rate may increase over time, but it will start out lower. Over the course of the loan, it may never rise very high.

Think about this carefully and compare terms before making a decision.

8. Pay down Existing Debts

If you already have a lot of existing debt, you may struggle to find an institution who will approve your loan. You may benefit from paying down some of your outstanding debts.

You should continually check your credit score with a free online service. Checking your credit score with these services doesn’t impact your credit score.

Take some simple steps to improve your credit score. Keep your credit line utilization under 30%.

You should make sure your credit score is accurate. It isn’t unheard of to find errors on your credit report. If you find an error, you can dispute it.

How Do You Apply for a Loan?

If you have poor credit, you may be concerned about getting approved for a loan. Personal loans can be used for many different purposes.

How do you apply for a loan? Make sure the loan is being used for an approved purpose and shop around. Apply for loans from multiple institutions and weigh your options.

The best thing you can do is take steps to improve your overall financial health.

To find out more about how you can improve your financial health, visit here.

Posted in: Personal Finance

Top of page