What Are the Factors That Affect Your Loan Approval
Have you ever experienced the frustration of having a loan denied? If you don’t want to end up in this situation, you need to do all you can to increase the chances of approval. The very first step to doing so is to know and understand what considerations are reviewed during the approval process.
Just about everyone knows that your credit score often impacts the terms of your loan, not to mention whether you get approved at all. However, it is not the only thing that the lenders consider. There are several other factors at play as well, three of which we will discuss below.
1. Your Other Loans and Debts
The first few things that affect your loan are your other debts and loans. If you have way too much debt to pay, your lender may decide you’re a risky borrower. Even those with a stable income may get denied if they have too many lines of credit taken out at once. After all, if something happens to your source of income, you may fail to pay off your debt.
If you have gotten huge loans continuously in a short period of time, your lenders will be concerned about your ability to pay them. Your lenders can see how much credit you’ve applied for just by seeing your credit report. All of your requests for personal loans, home loans, and credit cards can leave a messy trail on your report. This trail stays on your account for at least two years.
2. Your Current Earnings
It’s important that before you have a personal loan, you already have a stable income. Lenders do not want to lend money to someone who can’t pay them back. If you’re looking to obtain a larger loan, you need to prove that your income will suffice for loan payments as well as your daily needs.
Let’s say, for example, that you’re looking to apply for a loan that requires a payment of $1,500 monthly, but your current monthly earnings are $2,000. If this is the case, you are not likely to be approved for a home loan. If you’re taking out a one-time $500 loan, however, the terms will be much more lenient and you should face significantly fewer barriers to being approved.
3. Your Employment Background
Most people’s primary sources of income are their jobs. If you are currently employed and have predictable earnings each month, your chances of being approved for a loan is significantly higher. For example, let’s say that you’ve held a steady job for a couple of years. Lenders will then assume that you have a stable income source and will be likely to receive regular earnings to pay off your loan.
If you’re looking to take out a large loan or a mortgage, it may not be a good time to quit your job and apply for a new one just yet! For smaller loans, however, this should not be an issue.
Before getting a loan, it’s best to know and understand the key factors that affect the decision of whether you’re getting your loan approved or not. That way, you’ll be able to increase your chances and improve your situation to avoid being denied.
When you’re short on funds, a small personal loan may be what’s needed to help you get through the month. Here at Opelika Finance, we strive to make same-day loans ranging from $202.00 to $1491.00 with clear, straightforward repayment plans. We are not title lenders or paydays, but we are here to help you build your credit. Contact us now, and we’ll make your loan borrowing process quicker and simpler.