If you are looking to take out a loan, but unsure of the likelihood of it being approved, there are ways by which you can certainly maximise your chances of that being the case. Alternatively, you may have already applied for a loan and felt the sting of the rejection. If you are applying for much needed finance, whether that be a loan or a mortgage, being rejected can be heart-breaking.
At some point in our lives, the great majority of us are going to need to borrow money for something. That something may be a home, a car or to pay back basic monthly repayments when we hit a tough time financially. Therefore, it is important that we things to actively maximise our chances of being approved for a loan. Furthermore, this should not just be when we are wanting to apply – you may find that you need to apply for a loan as an emergency.
So, what are some things that you could do or not do in order to maximise your chances of approval?
Try to Boost Your Credit Score
When applying for a loan of any sort, it is no secret that the best loans are reserved for those with the best credit score. Furthermore, some lenders will simply refuse to lend to those who have a bad credit score.
If you don’t know your credit score, you should take some time to review your credit history before you submit any application. To do this, you can check your credit score online via the likes of Experian, Call Credit or Equifax.
In order to boost your credit score, you should make sure that you are always paying off your credit card in full each month, paying off any store cards. You should also aim to close any unused accounts as having too many of these open under your name can damage your chances of being approved by a lender as you are viewed as more of a risk since you already have access to a large amount of money.
In addition, you should aim to get on the Electoral Roll if you are not already on it, this way creditors can verify addresses and that you are in fact, a real person.
Avoid Making Too Many Applications
Some people are unaware that making too many applications can actually damage your credit score. People make the mistake of applying to a number of loans at one time in the hopes of being approved for just one.
However, each time you request credit the lender will take it upon themselves to look into your credit history with the aim to get an understanding of your habits surrounding spending and repayments. Each time a lender will do this, they will leave behind a mark on your credit file known as a “search footprint”. Whilst it is harmless to have a few of these marked on your credit file, having too many searches can cause your credit score to fall significantly. A hard search will stay on your record for 12 months, so don’t worry, they are not permanent.
It is important that you do not let this put you off requesting credit when you really need it, just make sure you are not applying for too many payday loans at one time or in a short amount of time. Most places have systems in place which will treat comparison shopping for a loan as one search rather than multiple searches because it is understood you are not trying to attain various forms of credit.
Check the Criteria of the Loan
If you have found a loan that you are interested in applying for, great! But, you should make sure to check the criteria before you apply to avoid rejection. You need to make sure you qualify for every aspect of the loan you are applying for; are you employed? Are you a home owner? Etc.
Be sure to shop around to find the best deal which you know you will qualify for. There are lenders which cater to those who do not have good credit history, but the interest rates will be significantly higher for these. Terms of the loan such as the interest rate and the length of the loan should be of concern to you. If 24-months of repayments for a loan for your budget, then only seek loans which offer this over, say, 36 months.
As well as checking the criteria of the loan itself, you should always make sure that you have provided the correct and accurate details as this will be flagged by the loan provider. You also need to make sure that the loan is for you and not on behalf of someone else as you will not be approved for the loan if your provider finds out, which is highly likely. Doing this can damage your chance of taking out further finance in the future.