17 Oct 2021

How to Qualify For a Personal Loan

A Personal Loan is a type of unsecured loan which does not need any security or collateral when applying for one and it helps to meet your immediate unspecific financial needs. Unlike any other loans, such as a home or a car loan, a personal loan borrower does not have to put any type of collateral such as property, or gold but it comes with a price. The interest rates on personal loans are higher than those on other types of loans and is a bigger risk when sanctioning them. However, failure to pay on a personal loan can reflect badly on your credit rating and may become a hindrance when applying for loans in the future. Since most people are opting for personal loans, it’s a good idea to get pre-qualified. Here are some tips that will improve your chances to qualify for better terms.

State your reasons

Before applying for a loan, be clear on why are you applying for it. If you are planning to use the loaned money to buy a property, care or for educational purposes, do your research and check out whether there are loan packages specific to it. Personal loans are mainly used to pay off multiple credit card debts, or a once in a lifetime expenses such as a wedding, medical bill or a vacation. Therefore, state your reasons carefully.

Credit rating

Before applying for a loan, analyse your credit rating. If your debt is large on your credit card, it will reflect badly on your credit rating. Should your “hit and try application” be rejected, the damage is even greater as you will need to report the rejected application the next time you apply for any kind of loans Analyse your credit rating on a yearly basis.

Debt to income ratio

Your debt to income ratio determines your ability to pay off the debt or loan in a given time frame. Apply for the right amount of money and don’t under or over-report your income. If your income is high, loan officers may overlook your credit rating  and approve your loan and if your income is low but your credit rating is good, you may not receive  the amount you are applying for. This shows that you need to balance your debt to income ratio and apply for the right amount to avoid rejection.

College and career

Apart from your credit rating and income ratio, some lenders look at other factors. They will take into account your education and a possible career path in the mix with average grades, possible career choices, current job titles being the major factor. The idea is to predict the foreseeable outcomes as some jobs have more stability than others and whether the borrower is able to continue his repayments on his personal loan.

Find the right lender

If your credit rating is below average, its likely that you will be rejected by most banks or they will demand higher interest rates. Therefore, analyse your credit rating before even applying for it. But if you desperately need money, you may need to consider lenders who specialise in high-risk borrowers. Analyse your options carefully, and consider other alternative options. Avoid short-term pay-day options at all costs and also look for online lenders that specialises in low credit borrowers. Applying for a personal loan can be risky but can be of a great help such as to relieve your bad debt and cover unexpected costs. Find the best rates for you and borrow only what you need. For better personal loan deals, contact Fast Repay Home Loan at 1300 707 955 or write us at info@fastrepayhomeloan.com.au/backup.

Looking to refinance or buy a house?

Find out how our Home Loan Brokers can help you find a solution. You name it, we solve it!

Continue reading