Many people who are planning to get a loan come up with the same question: how to have a loan application approved? There are certain rules and criteria that should be followed and if you do so, there is no apparent reason why you cannot get a loan. We will be trying to give you as much information regarding this matter as possible.
A loan application won’t be successful without a thorough examination of the borrower conducted by the bank. Lenders want to know who exactly is taking the loan and what is the likelihood of them paying the loan back. From the lenders’ point of view, this is fair because they do not have any certainty that they will get their money back. All they can do is minimize the chances of such events.
Budget Check & Credit Check
As part of the budget review, banks have to consider if the borrower’s budget is able to afford monthly repayments of the loan. This budget should also be balanced in terms of the monthly expenses.
The credit check is used to have an idea of the likelihood of the borrower abiding by the contract’s rules. For this purpose mathematical probability models are used, which evaluate past loans and repayments of the borrower. Debt-collection and credit reporting agencies are also contacted because they usually have usable information too.
Good preparation significantly increases the chances of success
The better the results of the budget and credit checks, the higher the chances of a successful loan application. A strong preparation can be decisive. There are few crucial points that should be taken into account in the loan application process and its outcome.
The total income should be neatly documented. Payslips from the employer will be very important. The same applies to any additional earnings. Keep these documents handy. Sum up any existing income on your loan. Applicants who have a partner may also declare the other person’s income and increase the countable income without having the other person signing the loan agreement.
Reliable debt repayment also improves your credit balance. Pay your financial debts; loans or credit cards. If you have any outstanding debts, make sure you pay them and ask the issuer of the loan to remove you from the central list of who haven’t paid their debts.
The right time to apply for a loan
Make your loan request when you are employed have no outstanding debts. Loan providers typically claim that borrowers have been in permanent employment for at least 3 months. Therefore, submit your loan application only after the completion of the probationary period. If you had recently taken any loans, it would be a good idea to wait 6 months from your last loan before applying for a new one.
Credit providers reward consistency in credit checks. This is also reflected by the time spent at the current place of residence. Already paid off loans have a positive effect on your credit rating. A sensible spending plan in the past is considered positive and a rather negligent handling is considered very negative.