Tackling your goals, whether they involve building your dream kitchen or paying off your credit cards once and for all, can be expensive. Applying for a personal loan can help.
Many consumers now turn to personal loans to finance their goals. Personal loans are unsecured loans, meaning they are not tied to an asset, such as a car or home, making them more risky to lenders. Therefore, lenders need to review your application to ensure that you qualify for a loan.
Consider the following: If you don't pay your mortgage, your bank can foreclose on your home to recover the money you owe. Using an unsecured personal loan to pay for your dream vacation, for example, doesn't have a tangible asset like a home associated with the loan, so your lender needs to be confident in your ability to pay it back. That is why it is important to have a solid financial position when you apply for a loan.
Fortunately, there are things you can do to increase your chances of being approved. Consider these 5 tips that might help.
Establish a banking relationship with your potential lender
Before applying for a personal loan at a financial institution, establishing a bank account there first can help.
When you establish a banking relationship with the institution, it has a record of your financial behavior, such as transactions in a bank account, which can be taken into account when analyzing your loan application. Demonstrating financial responsibility to your lender can help increase your chances of approval.
take care of your credit
Your credit score also plays an important role in your loan application. Credit bureaus rate your credit score from "bad" to "excellent." A very good or excellent score usually means that you pay your bills on time, that you have a reasonable amount of debt compared to your income level, which varies from person to person, and that you're not borrowing more than you're likely to be able to. to pay. You don't need to have a perfect credit score to get a personal loan, but a good score gives you more options, so you're more likely to get approved and qualify for lower interest rates.
Request a copy of your credit report before you start applying for a personal loan. If you already have good credit, great! You are already on the path to success. If you're worried, try these tips to boost your score before applying for a personal loan.
Request a loan only for the amount you need
Personal loans can range from a few hundred to tens of thousands of dollars, and the larger the loan, the more difficult it is to qualify. So figure out how much you really need to borrow and how much you can afford to increase your chances of getting approved for a personal loan.
There are other benefits to ordering only what you need, too. You will probably have to pay interest on your personal loan, and the more you borrow, the more interest you will have to pay. In other words, borrowing more than you need costs you money, while borrowing just enough money to fund your goals brings your loan more in line with your budget.
Calculate the right time
The sooner you start preparing to apply for a personal loan, the better. Planning ahead gives you time to develop a banking relationship with your potential lender, which likely increases your chances of success.
Planning ahead also gives you the opportunity to schedule your application at a time when you look most financially attractive to lenders. If you think you'll get a raise in three months, for example, consider putting off your personal loan application until then. Having higher income means there may be a higher chance of getting your personal loan approved.
The same idea applies to credit. If you think your credit score is likely to improve soon, waiting until it goes up will give you a better chance of getting approved or getting a lower rate.
Prepare and ask questions
If you're speaking with a financial advisor or loan specialist, make sure you have any required financial information, such as tax returns or pay stubs, on hand to help with the application.
As you go through the approval process, make sure you understand your interest rate and the terms of your loan, including what your monthly payments will be and how long it will take to pay off the loan.
Understanding the terms of your loan will put you at ease. It also puts you on the right track to meet your loan payment schedule, which will give you an even stronger credit history the next time you want to apply for a loan.
Once you're ready to apply, get in touch. Learn more about personal loan options at PNC Bank , and how we can help you reach your financial goals.