Whether due to an emergency or to buy much-needed equipment for work, you may find yourself in need of a personal loan. A personal loan is an unsecured loan obtained from a bank or a financial institution at a fixed interest rate. For most of us, it is the most popular option during a financial crisis.
Personal loans are beneficial for various expenses, including home renovations, travel, weddings, and medical emergencies. You can obtain a personal loan for debt consolidation and a surprise car repair. With the growth of digital lending, you can secure a personal loan in a matter of hours.
To increase the chances of approval of your loan application, you can look at the following tips:
Find a suitable lender for your financial needs
After the pandemic, inflation has increased to record highs, especially in countries such as New Zealand. According to statistics, average New Zealanders’ living costs increased by 7.7% in Sep 2022 compared to the same period in 2021. And with the rising interest rates, many people find it hard to keep up with their credit card debts. Most of them resort to personal loans to consolidate their credit card debts. While personal loans are easier to get and have a fixed interest rate, finding a lender that suits your finances takes time and effort.
There are a lot of personal loan lenders who cater to different financial needs of consumers, be it for home improvements, debt consolidations, or medical contingencies. Some lenders provide loans for any financial emergency, while others specialize in a particular financial need, such as debt consolidation. You can check out the debt consolidation loans provider in NZ if consolidation of credit card debt is your primary reason for pursuing a loan.
Apply for an amount that you easily repay
While you might want a higher loan amount, you should only apply for an amount you can afford. The chances of loan approval reduce if you apply for a higher loan amount. A pro tip is to consolidate your income sources and check what amount you can repay. A higher installment can limit your daily expenses to a bare minimum. You can use the loan calculators available online to check what amount is appropriate for you based on your income.
Maintain a good credit score
Another thing that improves your chances of getting a loan approved is maintaining a good credit score. The credit score indicates whether you’re credit-worthy or not. Credit scores can range from 0 to 1000, and above 600 is considered a good credit score. A good credit score increases your chances of getting your loan approved, while a bad credit score reduces your chances of loan approval. However, it does not mean you can’t get a loan if you have a bad credit score. Some lenders give loans to consumers with bad credit scores, although they are subject to a high-interest rate.
Increase your Income
The amount of the loan you can get depends upon your annual income. If you have a higher income, your chances of getting a loan are higher, and vice versa. If you want your loan application to be approved, you can work on increasing your income. If you have a full-time job, you can work part-time along with it. You can also invest in stocks or bonds to get extra income in dividends or interest payments.
Add a co-signer
As most personal loans are unsecured, many lenders have strict minimum income and credit score criteria. You might not meet the minimum criteria set by the lender if you have a low income or a bad credit score. If you don’t meet the minimum eligibility criteria for the loan, you can add a co-signer to apply for a loan. However, you must add a co-signer only if their credit score meets the minimum criteria set by the lender. Adding a co-borrower with a high income and a good credit score increases your chances of getting your loan approved.
Avoid multiple loan applications
While you may think applying to multiple lenders simultaneously increases your chances of securing a loan, it only affects your creditworthiness. Simultaneously applying to multiple lenders depicts a bad image of your financial situation and should be avoided. It can even harm your credit score if you continue applying for multiple loans.
Opt for a longer loan tenure
You are more likely to get a loan if you earn more money and opt for a longer loan term. The number of payments you make increases when you opt for a longer loan tenure, decreasing the amount you pay in each periodic payment. It helps you to repay conveniently. You will be less likely to default if you choose a longer loan term.
Provide correct information
While it might seem obvious, some people don’t provide the correct personal information, which reduces their chances of getting a loan. Even if you didn’t provide the wrong information on purpose, a simple spelling mistake could cost you your loan.
You must provide accurate personal information when you are applying for a loan. A pro tip is to double-check for spelling mistakes or inaccuracies while filling out the loan application form.
Mention all income sources
While filling out the loan application form, make sure to mention all your income sources. Don’t just rely on the basic income details; instead, go into as many details as possible. If you have made investments in stocks or bonds, make sure to provide details about those. If you have a place from where you get rent, you should mention that too. Providing thorough income information increases the chances of your loan getting approved.
A personal loan is the most sought-after option for many people experiencing financial crises. Whether because of a medical emergency or to purchase much-needed equipment for work, you might find yourself in a situation where you will need a loan. To increase your chances of a loan, follow the above-given tips. Maintaining a good credit score, increasing your income, having multiple sources of income, opting for a longer loan tenure, and applying with a co-borrower increase your chances of obtaining a loan.