Most lenders will have stringent affordability checks for the benefit of both the lender and the borrower. We’ve decided to delve deeper into what is usually looked at when applying for a loan.
Watch out for the credit requirements
Lenders will firstly consider your credit score as soon as you submit your application. They will be more interested in going through your credit history, especially in case of a personal loan. Any applicant that doesn’t match the criteria usually gets automatically disqualified.
A strong credit score is not the only guarantee for approval. Your loan request will get rejected if you miss out on any requirement posed by a lender. It’s better to do some research or ask the lender straightaway.
The requirement for a minimum income
Some lenders always look out for the minimum income requirement. You can usually find this out by visiting the lender’s official website or you can call them to find out the exact obligation. Lenders will not provide you with a loan if you do not have the financial backup to repay it.
People with a stable and high earning job are more likely to get approved for a loan. You may have to verify this such as sending your latest payslips – but each lender’s verification methods may vary.
Depending on the type of loan you’re applying for, you may need to have sufficient collateral to back it up. Banks for example will usually go for a property or other assets of high value.
Settle your outstanding debt
The DTI ratio (debt-to-income ratio) can be a game-changer for you. The majority of lenders treat it as seriously as the income requirement. A soaring DTI means that most your income is used in paying debts. Settling your current debts before applying for a loan could greatly increase your chances of being approved.
Provide legitimate details
You should always provide authentic information about your past and current details. A lender will instantly reject your application if any element is missing or if you have been found to being untruthful.
Have a solid loan purpose
Some lenders will want to know the reason you are taking out a loan. For example, it could be deemed irresponsible if a lender provided a loan for personal luxuries such as a holiday rather than an emergency bill. Responsible lenders of short term and quick loan will be more cautious of this.
To summarize, it’s always important that you be completely honest in your applications for any form of credit. If you’re dishonest, this could breach your contact and end up being more damaging in the long run. Lenders have criteria that have to be met by all applicants for a reason – and it’s usually mutually beneficial as it means the lender is more likely to be repaid but it also limits the chances of the applicant facing financial difficulties in the future if they’re unable to repay.