Small business loan approval rates have reached 28%; the highest it’s been since the last recession about ten years ago. While there’s no better time than now to get a loan with a favorable interest rate, you still need to set yourself up for approval. This also applies to personal loan applications.
At 28%, the majority of applications still get denied. So how can you qualify for a loan? Follow this guide to improve the likelihood of approval for your loan application.
Take a Look at Your Credit
Request a copy of your credit report and check it for errors. Have them corrected, so your credit history is accurate when lenders look at it. Monitor your monthly payments and have a few months of all on-time payments.
Work to reduce your current debt liability by making payments higher than the minimum required. Call your current creditors and request a limit increase. This is a fast way to reduce your credit utilization ratio. Ideally, you want it to be below 30%.
Consider a Co-Signer
If you know that your credit history isn’t strong and you don’t have time to improve your score, consider applying with a co-signer. The lender will consider both of your credit scores and history to determine eligibility.
Understand Your Current Budget
Look at your current income, expenses, and debt owed. Determine the amount you can afford for a monthly payment. This will ensure you don’t agree to a loan that you cannot afford.
You should also consider paying down some of your current debt to reduce your debt to income ratio, as this will improve your current credit situation.
Ask for the Right Amount
Determine why you’re asking for a loan and request a reasonable dollar amount to achieve your goal. Asking for more than you need is a red flag to lenders. Seeking a larger loan will require the lender to take on more risk and increase your monthly payment.
Find the Right Lender
Each lender has a set of minimum requirements for approval of one of their loans. You can avoid denial by not applying with lenders where you don’t meet the minimum requirements.
Getting cash becomes easier when you know what type of loan you qualify for and looking for a lender that specializes in those loans. For instance, if your credit isn’t great, you may want to consider a secured loan. You could apply with a lender that specializes in title loans.
You’re Ready to Qualify for a Loan
By following this guide, you can set yourself up for success and qualify for a loan. Start by looking at your current credit score and history. Do what you can to improve both and consider asking someone to co-sign.
Then strategically apply with a reasonable loan amount that has a monthly payment you can afford. Then look for a lender that specializes in lending to borrowers like you.
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