Money is an essential tool in getting what you need, and sometimes your savings may not be enough. Taking a personal loan is one of the easiest ways to secure short-term finance. It can be, however, disheartening to get your request for a loan rejected, especially after going through the tedious processes. Are you about to apply for a loan? Here are five simple ways to avoid loan rejection.
Five Ways to Avoid Personal Loan Rejection
- Meet the Credit Requirement: Credit is one of the principal factors considered before granting a loan request, and each lender has their credit requirements. It is crucial to check your prospective lender’s credit requirements and ensure that your credit score is up to par as a high credit score improves your chances of getting the loan. Note: Your Credit Score is a number from 300 to 500 that depicts your creditworthiness.
- Meet the Minimum Income Requirement: This refers to the minimum amount of money you earn regularly. Most lenders have a minimum income requirement to ensure that you can financially pay back the loan at the stipulated time. Some lenders may require your employment history for a certain period, so be sure you have a stable source of income as it increases your chances of being granted a loan.
- Have an Equivalent Collateral: A collateral is something that you pledge to forfeit if you default in paying back a loan. When applying for a loan, lenders will require equivalent collateral as a guarantee because it lowers the risks they face. Collaterals could be in the form of liquid assets or property, and to avoid getting your loan request declined, ensure you have sufficient guarantee.
- Debt-To-Income Ratio: A Debt-To-Income ratio is a way of measuring how much you can afford to borrow. A high DIT means that you are borrowing more than you can pay, which is not a good sign to lenders. Before you apply for a loan, try to clear your outstanding debts as most lenders will check your credit history before considering your request. You should also ensure that your Debt-To-Income ratio is less than 43% because it shows that you can financially pay back at the stipulated time.
- Provide the Requirement Document: Your lender will require you to provide some documents as part of your application. These documents include; bank statements, bank payslips, copy of a valid ID, letter of undertaking and any other as specified by your lender. Be sure to fill in correct details and verify your documents before submission.
Note: there’s no guarantee that your loan request will always be successful. You may meet all the requirements the lender sets and still get a rejection. In reality, it is at the lender’s discretion. However, you still have to do your own part and avoid mistakes that lead to your loan request rejection.
Above all, researching your prospective lender is one major thing to consider before applying for the loan. Make sure you compare other lenders to find the most suitable loan options. Good luck!