Going into a traditional bank and taking out a loan can feel like every part of your life is under the microscope. That’s because it is. Banks scrutinise every part of your financial history and repayment capabilities.
This is part of the reason many people are rejecting typical forms of personal lending and embracing the increased freedom and flexibility newer forms of personal lending offer. Companies like Quickle offer borrowers a short-term personal loan, with just one application form and one bank statement.
So what information do lenders use to determine your personal loan eligibility? There are the five factors that lending outlets use to decide if your application gets the nod or ends up in the bin.
The first thing a lender will look at is your credit score. This is a reflection of your repayment behaviour. If you have a strong history of paying back money you owe, in full, and on time, then there is a good chance you will do it again.
On the flip side, if there are signs that you don’t usually pay bills on time, then the lender may doubt that you will be a reliable borrower this time around. If you are unsure of your credit score, there are plenty of resources online where you can find out.
The higher your salary, the higher the likelihood of your personal loan approval. Most personal loans do not require collateral, as a result, the lender will want to know that your incoming payments are enough to cover your loan repayments.
Your salary is also an indication of your job security. Lenders want to see that you have a reliable source of income, not one that fluctuates wildly each month depending on your professional performance.
Just like your salary, employers will look at your employment history to determine your personal loan eligibility. Demonstrating that you have a strong history of employment, with minimal time spent without work, shows that you are a reliable worker and are not in danger of losing your job anytime soon.
Your Employers Reputation
Your employer’s reputation is another factor banks use to decide whether or not to approve your application. They want to know that your employers are not on the cusp of bankruptcy, or having financial problems that could force them to make job cuts in the future.
The ideal borrower will work for a stable company, posting healthy annual profits. Not only will your employer’s reputation affect your approval, it can also affect the interest rate the bank will charge on your personal loan.
Your Relationship with the Lender
If your personal loan application is with an institution you already have a strong relationship with, this will increase your chances of approval.
For the best chances of approval, apply to an institution with which you already have a good financial relationship. This may be a lender you have used before or an institution that you already have an account with.
Knowing how the approval process works before you start your personal loan application will help you maximise your chances of approval.