Personal loans are a popular method of obtaining financing in the US. According to TransUnion, Americans held more than $117 billion in personal loans as of the end of last year.
Most personal loans are unsecured, meaning that lenders don’t require collateral. However, before approving you for a loan, they’ll need to be sure that you’ll be able to pay it back in full and on time. If you’re interested in applying for a personal loan, there are a few things you can do to increase your chances of being approved without having to risk your assets.
Show a Stable Income and Employment History
When trying to determine whether you’ll be able to pay back the loan, lenders will look at your income and employment history. They want to make sure that you’re earning enough to make your payments on time.
Some lenders will ask you for proof of income, as well as employment history. Being with the same employer for a long time, typically over one or two years, will increase your chances of qualifying for a loan.
Get a Copy of Your Credit Report
Practically all lenders will look at your credit report when deciding whether you qualify for a loan. Therefore, it’s always a good idea for you to order a copy of your report from the major bureaus, such as Equifax, Experian, and TransUnion.
Your credit report will show your existing credit accounts, such as loans, credit cards, and mortgages, together with your repayment history. Check the report to make sure that it’s accurate. If you notice any errors, like accounts that aren’t yours, you can contact the credit reporting agency to submit a dispute.
The credit bureaus also let you see your credit score, in addition to the contents of your credit report. Your credit score is determined by a variety of factors, such as the amount of debt you have and your payment history. To qualify for a personal loan, you’ll need to have a credit score that is in the good to excellent range. While some lenders will work with people that have a fair or poor credit score, the interest they charge on loans is typically a lot higher.
Pay Down Debt
Lenders will also take into account your debt to income ratio when determining eligibility. By paying down your debt, your debt to income ratio will improve, and you’ll also appear more trustworthy. Another way of improving your ratio is by opening a new line of credit, but that can easily backfire if you overspend which could effectively intensify debt issues.
Credit card debt is one of the main factors holding people back from making essential life purchases like owning a home or getting a car, but oftentimes, simply paying back what’s owed isn’t an option. If you’re struggling with credit card debt or even facing a collection lawsuit, there’s a way to improve your situation without filing for bankruptcy.
Heather Benveniste with Benveniste Law Offices is an experienced Illinois debt settlement attorney who has helped numerous people settle their debt issues. With seven years spent as a debt collection attorney, she has key insight as to how debt collection companies operate and can use that to your advantage to negotiate debt repayment on the most favorable terms to you. Contact us today at 1-800-497-5358 for a free case evaluation.