5 Ways to Improve Your Chances of Getting a Personal Loan
Getting a personal loan can pay for a number of different things. Are you paying for a wedding? Do you have some emergency expenses coming up? Do you want to make some improvements to your home? Are you moving and need some extra money for moving expenses? Do you want to take your dream vacation? These and more are just some of the things in life that can be helped by having a personal loan.
If you are looking at getting a personal loan, there are ways to improve your chances of getting a personal loan with just a few tips. If you have time on your side, start doing these things now before you begin personal loan shopping.
Check and Improve Your Credit Score
Your credit score for a personal loan matters, so one of the first things you need to do is check it. If it’s been a while since you checked your credit score, then bite the bullet and do it now, since you may need some time to improve things. In general, you will need a score of at least 660 to applyfor a personal loan. FICO, a popular credit score bureau, has credit scores that run between 300 and 850.
If your credit score is too low, then lenders will think you run too much of a risk to apply for a loan. If you are able to think ahead and have some time before applying for the loan, start doing some things now in order to improve the score.
Pay bills on time and in full if you can. Avoid opening any new lines of credit before you apply for the loan, since doing so can immediately drop your credit score, even if it is temporary. Don’t close any credit cards either, even if you don’t use them. It looks good if you have a longer credit history.
Pay Down Existing Debt
Many Americans have debt, so don’t feel alone. Paying off existing debt can help you get better terms on your personal loan. This also helps improve your chances of getting a personal loan by helping your credit score. To help pay down existing debt, start with creating a budget. There are personal finance tools you can use, such as Mint.com, but you can also just use an Excel spreadsheet in order to track income and expenses.
Look at categories and see where you can cut costs. There are different ways to pay off debt and some say to pay off the most expensive debt first. Others suggest paying off the smallest debt first, because it’s more motivating to see debts get wiped out. Whichever method you choose, start paying more than the minimum balance in order to make a dent.
Make weekly payments instead of monthly payments in order to start paying it down faster. You may also be able to take advantage of balance transfers. Pay attention to the terms so that you don’t get into more debt by accidentally accruing a higher interest payment. While you are paying off your debt, try not to get into more debt by halting credit card spending.
Remove them from your wallet and don’t take them shopping with you so you can avoid being tempting. Everyone loves some retail therapy, but now is not the time. It’s also a good idea to delete your credit cards from online stores. It’s so easy to buy that shirt on sale when your credit card information is already stored. Changing daily spending habits can help prevent you from getting into further debt and also helps pay off existing debt.
Only Apply for the Amount You Need
Before you begin to shop personal loans, determine what you are going to use and ask for that amount only. By requesting more than you need to reach the financial goal, it can be risky to lenders. The last thing you want to do when trying to improve your chances of getting a personal loan is look risky to lenders.
Not only will a larger loan make you look riskier, but it will also give you higher loan payments that can be difficult to pay back. You also need to consider your other financial commitments when determining the amount you need for your loan. You have to pay back your loan, but you can’t just stop paying other payments, such as your mortgage or student loans.
Find a Lender Using a Free Online Service
Finding the right lender will help you make sure you can meet the requirements for a personal loan. Lenders online will disclose the minimum requirements for income and credit scores, and if they will offer options, such as using a co-signer. Using a free online lender finder service to will save time when personal loan shopping.
If you meet the requirements, then you can get estimated terms and rates and pre-qualify for financing. You may be worried that by pre-qualifying you will have a dent in your credit score, which you are trying to avoid. However, don’t be worried about this. This type of credit inquiring will only trigger a soft credit pull. This means that there isn’t an impact on the credit score. By pre-qualifying with different lenders, you can compare terms and rates and find the best loan for your needs and budget.
Consider a Co-Signer
If time isn’t on your side and you need to improve your chances of getting a personal loan now, then consider a co-signer. A co-signer with better credit can increase your chances of approval. This is because a co-signer can also be held responsible for paying the loan and the banks want to see as little risk as possible. It’s important to have a conversation with the co-signer to make sure they are aware of the risks if something were to happen.
Since income and credit scores are two important factors when trying to get a personal loan, finding someone with a better credit score and a higher income that can co-sign your loan increases your chances of approval.
Various Options Other than a Personal Loan
If a personal loan isn’t an option or you need more time to improve your chances of getting a personal loan, then you can consider some other options and what you need to know to get money fast. Some have requirements similar to getting a personal loan.
Credit Cards: It could be difficult to open a new credit card if you have a bad credit score, and it’s one of the things you shouldn’t do if you are looking to increase your credit score for a personal loan. However, this can be another financing avenue if a personal loan isn’t going to work for you, or you need more money than your personal loan will allow for.
Other Loan Types
Short-Term Loans: A short-term loan needs to be paid back within a few months or less than a year. Traditional bank loans usually allow years to pay back. Short-term loans can be used when there are minor cash flow problems and for emergencies. The same rules apply for short-term loans about not borrowing more than you can afford and avoid missing any payments.
Line of Credit: A line of credit is a preset amount of money that a credit union or bank will lend you. This can be drawn from the line of credit when you need it, up to a certain maximum amount. You then pay interest on the amount you borrow. You only pay interest on the borrowed funds and then once you pay it back you can have that amount available to you again. This type of financing is more flexible, as long as you stick to the terms. A line of credit is usually unsecured, so you don’t have to put anything up as collateral.
Secured Loans: A secured loan will allow you to put up a valuable item as collateral. This will eliminate some of the risk for the lender. By eliminating some of the risk for the lender, this allows you to get some better rates and terms than with an unsecured alternative. It’s important to understand that whatever borrowers put up as collateral, they risk losing if they aren’t going to pay the loan. Not only do they risk losing their collateral, but it can also damage any future financial standing. Secured loans can also be referred to as a title loan or home equity loan.
Conclusion: Improve Your Chances of Getting a Personal Loan
Once you have worked though the ways to improve your chances of getting a personal loan you can start the process. Getting fast cash loans online will allow you to find more competitive rates and give you more options when you are shopping around. You never know when something in life could come up and you need a personal loan. Following some of these tips throughout your daily life can help you get a personal loan when the time comes and you need one.
Kevin Strauss is a personal finance writer and homeowner based in the Los Angeles area. Being in one of the most expensive markets in the country, he’s learned to maximize resources to plan for both his monthly expenses and future financial needs. Kevin has a passion for helping those in a similar situation navigate the complex world of personal finance so they can pay down debt, plan for the future and live out their dreams. In addition to covering personal finance in depth on Loanry.com, Cashry.com, Debtry.com, Budgetry.com, Billry.com, Creditry.com and Taxry.com. Kevin shares his expertise with readers who want to create budget-friendly habits across the web.