September 3rd, 2020 | Updated on June 3rd, 2021
Planning to take a personal loan is a good idea that can help you draw your dreams closer. Perhaps you want to renovate your dream house, purchase a car, go on a holiday, or pay for your wedding. Whatever the reason, you need to be conversant with the criteria and the requirements.
Taking out a loan does not involve many complications as long as you are ready to present all the required details or documentation for review. The documentation will improve your chances of getting the approval of funds.
It would be best if you were smart when applying, meaning you will need to start the process early enough so that you have ample time to plan for the money.
Below are some ideas to help you facilitate the application process and the likelihood of loan approval.
Meet The Application Criteria
No matter the type of personal loan you plan to apply for, knowing what the financial institution needs is crucial to start your loan application journey. When you meet the expectations, you’ll experience a smooth process and get the money in time. You will need:
- Bank statements showing your financial history for a given period as required by the bank. They also include credit cards you have with other institutions, your saving activities, and loans.
- Employment history together with your employer’s details as required by the financial institution
- Proof of income, including tax files, gross salary, and the most recent payslips and tax assessment notice.
- Personal identification will help the institution identify your age. You must be above 18 years. It would help if you had ID cards and your passport, photo, age card, and driver’s license.
- No trace of bankruptcy on your name
- You need to show your location details including utility bills or copy of the lease agreement
- You must provide your liability details to guide the institution through a credit check to establish your credit base. They include accrued wages, deferred revenue, outstanding debts that you need to clear within a year, and accounts payable.
Know What You Want
Personal Loans should help you achieve your goals, you will need to establish your needs and the depth of the issue you need to sort out with the cash before making a decision. There are various ways to help you determine how much you need.
For instance, check out online calculators to help you get an estimated amount depending on your income and lifestyle. Whatever the outcome of the estimation, ensure your income is enough to support the loan.
If you had already set up a figure that cannot be backed by your income, consider reducing it or extending the loan repayment term. Getting it right at this stage will help you maintain good cash flow.
Check Your Account History
One of the ways the lending institution determines your eligibility stand is when you have been managing your finances effectively.
It will show that you are the right candidate for a personal loan. The institution will also check out the transaction flow of your account.
For instance, if there is money left over from your salary after paying your bills, it creates an indication that you are an excellent budgeter, and you can manage the loan.
It also assures the institution that you are capable of paying back. Also, ensure that you do not overdraw your account to avoid fees and maintain good account history.
Keep A Good Credit Rating
Credit rating is a crucial factor given high consideration by your lending institution. It significantly contributes to the final decision whether you qualify for the loan or not. To avoid a bad credit rating, ensure you clear electricity and phone bills on time.
Find out carefully any instances of missed payments and any arrears of debt collections, which also affect your credit score. To be sure of your credit score, get a report from the accredited bodies to clarify any doubts.
Your application can also be affected if you have a history of borrowing money from multiple financial institutions in a short span of time.
Have A Good Savings Record
Saving money will help the lending institution know that you are financially responsible and manage to utilize the personal loan well.
Once the institution can see that you can save money weekly or monthly, it is a good indication that you will regularly repay the loan and are unlikely to default.
Get It Right
Getting every requirement right from the beginning will save you a lot of time and resources.
By having all your accounts and documents in order before you apply, you can avoid too much back and forth with the lender and set yourself up for success.
The above ideas will help you keep a checklist of requirements and prepare for a smooth loan application process.
About The Author: Ray is a sought-after thought leader and an expert in financial and money management. He has been published and featured in over 50 leading sites and aims to contribute articles to help novice financial planners. One of his goals is to impart his knowledge in finance to educate and help ordinary people create and achieve their financial goals.