Improve Your Chance of Loan Approval by Following 4 Simple Steps

There’s no one-size-fits-all formula for winning approval of a loan application. Some basic requirements such as credit score and income will vary from one lender to the other. Additionally, some online lenders will consider nontraditional data like education level or free cash flow. However, all loan companies have one thing in common: they want to get paid promptly and on time. In simple terms, this means they only approve borrowers who meet their requirements.

Before applying for a loan, the first thing you need to consider is to make sure your finances and credit are in good standing. Even with relatively low credit, there are things you can do to increase your chances of being approved for a loan. Let’s dive in and cover the various steps you can take to get approved for your next loan.

⦁ Work with the Right Lender

Even with a relatively low credit score, you may still qualify for a loan if you’ve chosen the right lender. There are lenders in the market who can loan smaller amounts of money for individuals who are rebuilding credit. If you’ve chosen the non-conventional route of a loan application, you can apply online with iCASH. The advantage of online lenders is that they offer a wide range of loan amounts if you’re a potential loaner with a good credit standing. Ideally, banking institutions will automatically reject loan applicants with a credit score that is below 700. This also includes local credit unions and community banks. An excellent way to find a lender with flexible loan requirements is to talk with people who have been in the same shoes as you are. You can take recommendations from friends or family members who will lead you in the right direction.

⦁ Your Credit Score Matters

Under this scenario, your business and personal credit scores play a vital role in a loan approval. Lenders use your credit history to assess how well you manage money and how likely you will repay the loan. Remember: the higher the credit score, the less risk you pose to money lending institutions. Start by getting your credit report from the credit reporting agencies. Ideally, these agencies provide you with reports detailing your credit score, and you can use this information to improve it.

We recommend doing this first before approaching a lender. One of the best tips to improve your credit score is to update your company profiles on credit bureau websites. Additionally, pay your bills on time for more than the minimum amounts due. Again, we also recommend that you separate your personal and business expenses into different bank accounts.

⦁ Is Your Income Steady?

Having a dependable income source is a vital financial factor in the loan application process. Any lender you visit will need to know you’re making enough cash to pay back the loan. They will also want to assess that your income comes from a reliable source, such as a business or a steady job. One of the things you don’t want lenders to see is a massive drop in your income or a switch in jobs right before applying for a loan. This paints the wrong picture to a lender, and they might be skeptical of you. We recommend that you try and keep your work situation the same in the months before taking out a loan. This shows the lender you’re a responsible borrower who can meet the cost of repaying the funds promptly and on time.

⦁ Keep the Loan Duration Short

In many cases, long-term loans present a significant risk to a lender. This is because the longer you have to pay off the loan, the greater the odds something might go wrong. If by unfortunate circumstances, something goes wrong, this leaves you unable to make your payments. Additionally, a long-term loan means it takes longer for the lender to get their money back.

We need to point out that the lender also collects more interest in this case, so it’s a win-win situation. For the borrower, the advantage of a long-term loan is that the monthly payments will be small. However, you should know these loans are difficult to qualify for. They tend to be much more costly over the long-term since you pay interest for a longer period. We recommend that you opt for the shortest loan term you can afford.

As you’ve seen, there are plenty of ways to boost the odds you’ll be approved for a loan. We advise that you start working on these steps today if you plan to borrow a loan soon or shortly. In the long haul, you will increase your chances of hearing “approved” from a lender of your choosing. Over to you!