Getting a personal loan from a bank, or a private lender or from any financial institution has become easier than earlier days. The way banking was conducted has evolved and now brick and mortar lenders have also shifted their business online. However, the regulations and policies governing lending have become stricter. The Financial Conduct Authority (FCA) checks and reviews the rules to promote a healthy and responsible lending landscape in the United Kingdom. Consumers always suffered when it comes to borrowing a loan. Predatory lending gave rise to loan sharks who used to charge astronomically high rates of interest to borrowers. All these unhealthy and unhealthy business practices were put to a stop after the FCA introduced capping on payday loans in 2015.
There is no hard and fast rule to get your personal loan application approved. But there are a few things that you must take into account before applying to avoid rejection. Knowing the factors that can affect your loan application decision beforehand will increase the chance of your loan application acceptance. While the lenders may have several criteria to screen your application, here are 5 tips that will help you to get your personal loan approved.
1. Check the Eligibility Criteria
Before you hit the submit button on your loan application, go through the eligibility criteria of the lender you’re applying to. Every lender has their own terms of lending and it may vary from one to another. If you apply to them and your application will not even meet the general criteria, it will be rejected by the lender. And when you apply to the next lender, they can see that you had applied to a lender who had rejected your personal loan. This might create an impression on his mind that your profile is not suitable and he may reject your application too. In that way, your credit score will be completely ruined and your chances of getting a loan will be hampered too. Although there are lenders who offer Personal Loans for Bad Credit and No Guarantor – the rates of interest they will offer will be quite high due to your poor credit profile.
2. Review your Credit Profile
We often overlook our credit reports and do not check it. However, you must always review your credit profile, at least once a year. Go through your report carefully and if you spot any mistakes, report it to any of the Credit Reference Agencies (CRAs) to make necessary corrections. When you apply for a loan, the lenders check your credit profile and such mistakes can reduce the chances of your application to be approved. Also, lenders have their criteria as to who to lend and who not to – in terms of the credit score of the applicant. If your credit score is something that the lender doesn’t accept, it is better to find a lender who accepts loan applications of borrowers who have a similar score. Or else, you have to work on improving your score.
3. Ensure the details on the Form
The lenders will conduct verifications and checks on your profile after you have provided them with your details. Ensure that the details you fill in the application form are correct and true. If you have provided any incorrect information in the form – it may lead to the rejection of your loan application. Once you fill the entire form, take a break, roam around your home and come back to your laptop to check the details that you’ve filled. That way it will be easier for you to find mistakes or errors on your form if you have any. Double-check your loan application details and then submit the form online for further processing.
4. Know your Affordability
Personal loans are generally unsecured that means you do not have to provide any collateral or arrange for any co-signor while borrowing the loan. This is the reason why lenders will check your affordability before making their decision. They will perform affordability checks to know your monthly income, outgoings and how much money is left at the end of the month. Will that remaining amount is sufficient for the repayment of the loan or not. They will consider all these factors before giving out their decision. If you do not have a sufficient amount to repay the debt on time and in full, you must consider other alternatives for funding your expenses rather than opting for a loan.
5. Don’t Apply for Multiple Loans
Whenever you apply for a loan, a credit check is carried out by the lender. Every time a credit check is performed on your profile, it leaves a “footprint” on your record. Making multiple loan applications may indicate that you are desperate for a loan and as so many lenders have already rejected your loan application, your profile must be risky. Therefore, lenders may turn down your application. Rather than applying for multiple loans, check the available rates from multiple lenders using only one loan application. There are a lot of credit brokers who offer you a platform to compare loans for free.
Whether it’s a personal loan or a short-term loan for bad credit or any other standard loans – you need to take care of these points before you are all set to submit your loan application. Careful considerations and reviews will not only help you save time and effort – but will also help protect your credit score. These 5 points are not the only five that the lenders consider, there are various other things that they check to form their decision. These five are the important and general ones that every lender consider apart from their own lending criteria. Ensure that you do not make any mistakes and choose an FCA authorised lender or credit broker for your financial necessities. Make timely repayments to boost and maintain your credit score and go through the Terms & Conditions of the lender before signing on the dotted line.
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