How to Boost Your Chances of Qualifying for A Personal Loan

Credit cards can help you if you are in a pinch, but if you need a large amount of money (that you can pay back over a few years), a personal loan is your best bet.

However, unlike home loans and car loans, most personal loans are unsecured, which means you don’t have to submit collateral to back the loan – given this, personal loans can be hard to get. That’s why we’ve listed a few tips here to help increase your chances of getting a personal loan.

Check Your Credit Report/Credit Score

The higher your credit score, the greater the chances of loan approval. So, study your credit reports carefully for any errors like the presence of wrong accounts, closed accounts appearing as open, and wrong credit limits shown. Dispute the errors if any, with evidence, online or over the phone, and get them rectified. In addition, ensure that you are making all your payments on time. Remember that missing any payment can reflect negatively on your score.

Rework Your Loans and Income

Increasing your disposable income (either by getting an additional job or saving up your tax refunds and other such sources of money) and paying more towards your loan every month helps in reducing your debt. This in turn will lead to an improvement in your debt-to-income (DTI) ratio. A low DTI indicates that your present debt is under control and you have the capacity to take on more.

Borrow only As Much as You Need and Not More

Do not request more money than what you need. A larger personal loan might look attractive at the moment, but it will strain your monthly budget, as higher loan payments mean you may not be able to meet your other financial obligations.

Get a Co-Signer

If your credit score is mediocre, having a co-signer with a stronger credit score and higher income can increase your chances of getting approved for the loan. However, remember that if you miss your loan payments, your co-signer’s credit score will dip as well.