How to Improve Your Chances of Loan Approval

Taking out a loan can be a stressful ordeal, especially if it’s your first time. There are many factors to watch out for, and the implications of making one wrong move can be pretty severe. That said, the lending market is quite well-developed these days, and it offers many opportunities for people who want to get their hands on some extra cash fast. The overall process is very streamlined and straightforward, and you just have to find a lender to work with and reach out to them after taking the time to compare interest rates and other similar factors.

Know Your Credit Score

Your credit score is a very important number when it comes to taking out a loan. It’s basically the main determining factor which says whether or not you’ll get approved or not. A good credit score will open the doors to all kinds of attractive deals which you otherwise simply would not be able to get. And while it does take a lot of time and effort to bring your credit score up to a respectable level, it’s definitely worth going through that.

Likewise, if your score is currently low, it will take a while before you can improve it. Until then, you’ll either have to postpone taking out your loan, or go with one that has lower approval requirements.

Don’t Keep Credit Lines Open for no Reason

This one is a common mistake that people tend to make, and it can hurt their chances of getting future loans significantly. Credit lines should be utilized if they’re open – otherwise they are hurting your credit score. Credit cards are the most common example of this. It’s not rare to see people take out a credit card, use it for a while, and then completely forget about it. It might not seem like a big deal – after all, you are still paying whatever monthly fees they are asking of you – but when it comes to your credit report, this is going to be seen as a suspicious factor which will drag down your score. Sometimes it may even affect you by a lot, especially if you have multiple lines of credit open.

Pay Off Outstanding Debts

This one should go without saying, and yet some people underestimate its importance. Before taking out a new loan, you should pay off any existing ones in full. The only exception is if you need the new loan to pay off your old ones. But if you’re in a situation like that, this is indicative of some bigger issues that you should think about very carefully.

But in any case, if you’re approaching a lender for a new loan, try not to have any other ones currently open. Otherwise, you’re going to have to explain exactly why those lines are open, and you might have to reveal some things to the lender that you would rather not.

Check for Mistakes on Your Credit Report

Sometimes your credit report might not be entirely accurate. This is often the case when you’ve paid off an old debt but the company has forgotten to notify the corresponding financial authorities that your account is now clear. You have to go through your report in detail and verify that everything listed on it is actually correct. Take your time to compare the points against your own documentation. And as soon as you notice that anything is out of the ordinary, talk to the company in question to get your account sorted out as soon as possible. Don’t delay this, because it will take some time to see a proper resolution.

Talk to the Lender Directly

Lenders can be more understanding than you might expect, and sometimes they will be open to discussing your current situation in person. If you feel like you should still be eligible for a loan, but the situation does require some extra explanation, try to arrange a meeting with your lender and lay your cards on the table for them.

Sometimes this will not grant you immediate approval, but it may make the lender reconsider your overall situation and offer you an alternative deal more closely suited to your personal financial issues. And if it’s something recommended by a lender after a personal conversation like that, it’s not a bad idea to consider it seriously. Because they likely know what will work for you better than you do, as they’ve seen similar situations plenty of times in the past. Don’t fall for the bad line of thinking that your lender is out to get you. Many people wrongly believe that for some reason. In the end, a lender has as much interest in seeing you repay your loan in full as you do.