Whenever you apply for a loan, your most important concern is that the loan should be approved instantly. Nowadays, with the advent of online lending options, loan approval has become quite easy. Still, there are some aspects on which you need to work. There are some important factors for lenders which they cannot ignore.
In taking care of such lending rules, loan companies have to follow some basic affordability parameters. If you are aware of those factors, you can even get easy approval if you apply for a loan with a bad credit history.
Several aspects can increase your approval chances manifold if you work on them in time.
Let us know the ways through which you can easily get your loan request approved on the first attempt.
Understand what lenders need to approve funds
Your loan will get approved easily only if you qualify for the terms and conditions of the lenders. Every loan company has to approve the loan by checking some basic affordability factors. For them, those are vital sides to knowing your financial stability.
These are -
- Credit history - your approval decision is taken on the basis of your credit or payment history. However, nowadays, approval is available even in bad credit situations if you have a strong current repayment capacity.
- Employment proof - To prove your repayment capacity, you must provide proof of employment. You can authenticate your employment proof by providing your current employer's address and salary slips.
- Debt-to-income ratio – It is also an important factor. A debt-to-income ratio of more than 40% can reduce the chances of loan approval. If only 40% of your total income goes towards paying the debts, then this is an ideal ratio. If you spend more than this, you get approval but with a high interest rate and repayment capacity. The chances of loan rejection increase substantially for a debt-to-income ratio of sixty percent or more than 60%.
Check and improve your credit score
You can also increase your chances of approval by checking your credit score and credit report. Credit reference agencies maintain your financial records according to your financial behaviour. Sometimes, by mistake, wrong information is mentioned in it.
For example, a loan that you have already paid shows as pending in your credit report. Similarly, a closed account that you have not closed yet shows there. Whenever you make your credit report error-free, your credit rating improves.
Removal of wrong information shows your improved financial behaviour, which increases your credit score. This easily improves your chances of approval. Before applying for a loan, always check your credit report through credit reference agencies. Equifax, TransUnion, and Experian are the three credit reference agencies from which you can get a free report annually.
Apply as per your repayment capacity
Many times, the loan application gets rejected because fund seekers apply for an amount beyond their payment capacity. If you want your request to be approved on the first attempt itself, apply for only that amount that you can easily afford.
Anyway, lenders perform an affordability check on every application. Only after a proper hard credit search is your loan amount approved on the basis of your credit purchase power. Therefore, it would be better if you checked your eligibility through a loan calculator.
According to that, you get a fairly accurate estimate of your repayment capacity. Then, mention the same loan amount in your application that matches your payback capacity. By applying as per your payback capacity, you can even get no credit check loans without a guarantor. After all, this reduces the risk of the lender.
Avoid multiple applications to multiple lenders
If you apply for a loan from multiple lenders, they all perform a hard credit search on your financial records. By doing this, your credit score comes down drastically. Many fund seekers do this out of ignorance and desperation to borrow funds. They think that if they are applying to many lenders at the same time, some lenders will surely approve funds. Also, you sound credit-hungry due to multiple searches, which denotes poor personal finances.
Whenever you apply for a loan, instead of applying to multiple loan companies, choose only one loan company and send your loan request. For this, it is important that you choose the most affordable lender. There are some direct lenders in the market that offer instant funds at easy instalments.
For instance, Annuityloans is a direct loan lender in the UK with customised options to provide you with budget-friendly loan solutions. These lenders do not apply any hidden charges and do not delay fund disbursal. As per your repayment capacity, your funds are sent to your account within 24 hours.
Provide complete and accurate information
Sometimes, fund seekers do not provide their correct financial details due to ignorance. Sometimes, they hide the information to hide their poor payment record. It is important to know that, nowadays, approval decisions are made through online verification.
In that case, if you hide any information knowingly or unknowingly, it can be easily detected. The finance company receives your credit report from credit reference agencies and checks it thoroughly. Therefore, if you want your approval decision to come instantly, you have to be honest and provide all the information.
If you hide any information, lenders can reject your application right away. At the same time, even if you apply for the next loan with the correct information, your approval chances are negatively affected by it.
Conclusion
All the points mentioned above offer practical solutions to increase the chances of loan approval. It is vital that you follow them thoroughly. However, another vital factor is that after the funds are approved, you repay them on time.
This is because, in the future, your loan approval will depend not only on these factors but also on your repayment capacity. Therefore, along with working on your finances, you need to work on your responsible financial behaviour.
The most important thing is to work on your personal finances because nothing is stronger than that. If your credit report shows responsible financial behaviour, lenders chase you to provide loans on affordable terms.
