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Loan Eligibility written on sticky notes isolated on Wooden Table

How to Tell If You're Eligible for a Personal Loan

Personal loans are a great way to get the money you need for large expenses or unexpected bills. But not everyone is approved for a loan, so it's important to know what lenders look for when deciding if you're eligible. For a loan through Simple Fast Loans, they will look at your credit score, history of paying back loans, and the amount of debt you have compared to your income.

In general, lenders look for borrowers with a good credit score, a consistent repayment history, and a low debt-to-income ratio. In the simplest of terms, they want to know that you have a history of paying your bills on time. Yet, even if your credit is less than stellar, you could still get approval with more stringent terms and conditions.

If you're worried about your eligibility, continue reading below. This article will discuss each factor in greater detail, explain how lenders evaluate applications, and offer tips on improving your chances of approval. We'll also discuss what to do if you're denied and how to prepare for the next time you apply.

Your Credit Score Can Set the Terms of a Loan

More than anything else, your credit score is the most important factor that lenders consider when evaluating your loan application. A credit score is a three-digit number ranging from 300-900. The higher your score, the better your creditworthiness.

Generally, a score over 680 is considered good, and a score over 750 is excellent. On the other hand, a score below 600 is considered bad and could make it difficult to get approved for a loan. This isn't to say that you won't get approved, though. Keep in mind, though, that it may take longer, and if you're approved, you'll likely pay higher rates and have stricter terms.

Peoples credit scores in a crowd

Your Repayment History Matters

In addition to your credit score, lenders will also look at your repayment history. This is a record of how you have paid off your debts. If you've consistently paid your debts on time, lenders will view you as a reliable borrower and are more likely to approve your application.

If you don't have much credit history, lenders may also look at other forms of repayment, such as rent, utilities, and insurance payments. But, again, paying these bills on time shows lenders that you're responsible with money and can be trusted to repay your loan.

Your Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is another factor that lenders consider when evaluating your eligibility for a loan. This ratio is calculated by dividing your monthly income by your total monthly debt payments. If your DTI ratio is low, it means you have a good handle on your finances. If your DTI ratio is high, it means you have too much debt and may have trouble making payments.

Generally, lenders prefer a DTI ratio of 36% or lower. If your ratio is higher, you might still be approved for a loan but will likely face less favorable terms and conditions. If you need clarification on your DTI ratio, you can use a free online debt-to-income calculator to get an estimate.

Other Factors

In addition to the abovementioned factors, lenders may consider other factors when evaluating your loan application. For example, they may look at your employment history, assets, and income. Lenders may require additional documentation to prove your income if you're self-employed. You may also need to provide documentation on other assets, such as your car or home.

Improving Your Chances of Approval

If you don't meet all of the qualifications for a loan, there are still steps you can take to improve your chances of approval:

  • Pay down your debt: If your debt-to-income ratio is too high, you can pay down your debt to lower your ratio and make yourself more attractive to lenders. This will also help to improve your credit, but it won't be an immediate shift.
  • Improve your credit score: Paying your bills on time and keeping balances low on your credit cards can help improve your credit score over time. Don't expect this to happen overnight, however. If you're hoping for a quick loan, you may have to settle for less-favorable terms.
  • Offer collateral: Offering collateral, such as your car or home, can help increase your chances of approval. However, not all lenders will accept collateral.
  • Get a cosigner: If you don't qualify for a loan, having a cosigner can help increase your chances of approval. They will act as a backer for your loan and provide more validity to your application.

In general, though, Simple Fast Loans have experience working with all types of credit and financial situations. You should only take these steps if you are sure that your loan application will not be approved.

What To Do if You're Denied

If you're denied a loan, take some time to review your application and look for any errors or inaccurate information. In most cases, Simple Fast Loans will approve your loan application if your personal details are correct. However, if you find any errors, submit a dispute to correct them. You can also improve your credit score or find a cosigner to increase your chances of approval.

The Bottom Line

Getting approved for a personal loan can be lengthy, but it doesn't have to be overwhelming. If you have a valid credit score, a consistent repayment history, and a low debt-to-income ratio, you'll likely have an easier time getting approved. You can also take steps to improve your chances of getting approved, such as paying down debt, improving your credit score, offering collateral, and finding a cosigner.

If you're still denied a loan, look for other lenders who may be more willing to work with you. Simple Fast Loans can work with you, and they have a simple online application that can be completed in minutes. So, stop stressing over your finances and apply today.

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