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There may come a point where you will need to borrow money. It could be a home renovation project, a medical emergency, a planned holiday, or anything that you cannot just afford by pulling out some funds out of your savings. When such a situation arises, however, the biggest concern would be whether you’d get accepted or not.
There are numerous factors that will likely affect your chances of getting approved for a loan or not. Different lenders will have different requirements set and depending on the type of loan you are getting, there may be additional requirements that you must meet. You will feel more confident about your chances of approval though when you know what is expected of you.
Your Credit History Matters a Lot
Your credit report shows a record of all the credit transactions and applications you have made were you are given a respective score. Actions where you have made a lot of credit applications before, have been rejected for a loan application, or have made late payments on a loan or a credit card can have a negative effect on your credit score.
The Right Credit Type is Crucial
The key to getting a good chance of a loan approval is choosing the right products to fit your current needs but your current financial standing as well. Depending on your circumstances, some lenders may be able to lend you a large sum or a smaller one. Some may even require you to apply for a secured loan.
Borrowers with a poor credit history will do best by asking for a smaller amount. Never borrow more than you need and most importantly, never borrow more than what you can afford to pay back. You’ll need a good reason for the loan as well as lenders would want to know how you intend to use the money lent to you.
Expect to be Asked for Documentation
Some lenders might need you to show additional documentation in processing the loan application. Among the most common things you will likely be asked to present are monthly bills, bank statements, as well as details of your expense and income. Lenders will also want to verify your personal and financial details so they know that you are exactly who you say you are.
Start with Your Bank
If you happen to have a savings or checking account with a bank and have been with them for so many years, you always have the choice to start your loan application from there. The bank knows you and can see how much you have been paid all these years along with the standing orders or direct debits under your name. This could give you a bigger chance at loan approval.
Applying for a loan can be a nerve-wracking experience. But there will be times when you need to borrow money to fund some unexpected expense. If and when you need to, you’d want to know if you have a chance of getting approved for one. If you have looked through all your options and decided that a loan is the best option for you, there are some things that you can do to improve your success.
Apply to the Right Lenders
Different lenders will usually have different approaches to the risks involved when dealing with loan applicants. Some have stringent criteria that borrowers need to meet while there are those that would not mind lending money to low credit score borrowers by just increasing the APR or the annual percentage rate.
Your credit score plays a huge role on getting approved or not. A higher credit score means you will likely get accepted. However, a slightly problematic credit score might mean that you will need to look for lenders that specialise in your kind of situation. Soft searches might help you determine the likelihood of getting accepted. Searches like these will not affect your credit rating but will at least allow you to pick lenders who are likely to accept your application.
Build or Improve Your Credit History
Missed and late payments in the past will always have an impact on your credit score. It pays to take the time to improve your rating first such as getting registered in the electoral poll before you start applying for a loan to improve your chances for an approval.
In the same manner, if you have not yet built a credit history and you have not borrowed from the past, lenders will have a hard time establishing how good or not you are with your finances. So, it helps to start building your credit history early on.
You might be able to benefit more from getting a credit card with interest-free purchase options. This would be most apt if you only plan to borrow smaller amounts like £500-$1,000. Getting a card with 0% interest means being able to borrow what you need without the burden of an added interest charge.
A cost-effective option compared to taking out a loan, just see to it that you get the debt completely cleared before the interest charges kick in. You’ll also need to look for a card that offers a long enough term for interest-free payment. This would give you enough time to get the debt paid off before you start getting charged for interest fees. Use this as another way for you to improve your credit score.