The requirements for borrowing loan normally vary among lenders and can be the difference between approval or rejection of loan. Nonetheless, there are a few things that increase the chances of the loan being approved. The first thing a borrower should do before visiting lenders is to check their credit rating.
Credit rating determines their creditworthiness. It’s something like a barometer of how likely the borrower is going to pay back the borrowed amount. For instance, a borrower with a low credit score means the lender is taking a much high risk by approving the loan application. Good credit scores improve the chances of the loan being approved.
- Comparing lenders is an important step in the application process. Moreover, a borrower should review the turnaround time, fees charged and terms of conditions of various lenders.
- As a borrower, you should also review the lender’s eligibility criteria. Lenders have different application criteria including the information they need. The basic information is that the applicant should be above 18 years. The borrower should also have a regular income. However, lenders vary on the source of income. They also vary on what level of bad credit they accept. For instance, there are some who accept applications from discharged bankrupts but others don’t.
Generally, an applicant needs to provide the following documents:
Documents that can verify the identity e.g. passport or driving license.
Bank statements or Internet banking details-so that the lender can access the banking history of the borrower (usually the last 90 days).
Employment details-including whether the applicant is employed, nature of employment (full-time or part-time) and for how long the applicant has been employed.
Income and expenses to help in determining the loan amount the borrower can afford.
While a borrower will be asked for different information depending on the lender, the information is used for similar purposes. They go through bank statements/internet bank logins to get a general idea of the financial position of the borrower. They need to be confident the borrower has money in the bank account in order to debit repayments.
- Approval – A lender lets the borrower know if they have been approved or not (a matter of minutes).
- If approved, the borrower has to agree to the contract before the funds are sent. A contract has the terms, fees for late payments and repayment amount.
The most important thing to take away is that you shouldn’t rush the application. Even though emergency situations force people to apply as quickly as possible, taking time during the application increases the chances of approval.