If you’re looking to take that long earned holiday, renovate or simply consolidate your debt, you might be considering a personal loan. Whatever the reason, it’s not loads of fun to get your application rejected. We’ve done the research for you and come up with 9 tips to help you get that application approval.
1. Check that you’re eligible
The very first step to getting your personal loan approved is verifying that you actually meet the eligibility requirements. Often this will include things like:
- Age criteria- upwards of 18 is a fairly standard requirement
- Citizenship, permanent residency or eligible visa status
- Whether you actually live in Australia
- Minimum income requirements– so lenders know you’ll be financially able to make repayments
- Employment status- often you’ll need to show that your employment is stable or that you receive steady income
- Not be financially insolvent or bankrupt
- Have a good credit rating
2. Make sure you have a good credit rating
Having a great credit rating can mean the difference between whether your personal loan is approved or rejected. Check that your credit file shows all your accounts, and you as the one in charge of them. There are also plenty of online tools to help you calculate your credit score before applying. Credit scores can also be bad or very bad. It’s possible that you’ve never missed a repayment ever, a track record of many loan applications might say something about how you manage your money.
3. Provide proof of sufficient income
It’s not unusual for personal loan applications to be rejected because the applicant doesn’t earn enough income. If your income won’t cover the repayments on the personal loan you’re applying for, it will be difficult to get your application approved. Don’t worry too much though, it’s not a bad idea to work backwards and think about how much you can actually repay monthly. With an idea of what you can afford, you can look around for other loans with lower minimum income requirements.
4. Make your application amount reasonable
A good amount to apply for is just the amount that you need. If your holiday plans will cost $5,000, then you might want to limit your application to $5,000. As larger loan amounts are seen by banks and lenders as more risky, a reasonable sized loan will be more easily approved than a larger one.
5. Double-check your application details
Very often, lenders will go through a process of confirming that the background information you’ve provided is actually valid. Because they’ll want to corroborate the details on your application against other sources, it’s recommended that you review your application before handing it in so you don’t look dodgy. Any inconsistencies or mistakes you’ve made on your application might be interpreted as an attempt to misleading, which lenders don’t appreciate. If you want your personal loan approved with less stress, it’s advisable to double check everything you’ve put down on your application.
6. Have a good savings history
If applying for a personal loan with your existing bank, they’ll be able to check out your savings history easily. If you’ve put away money regularly, it shows that you’re financially responsible. This is a definite pro for getting your personal loan approved, as it shows you’re just as likely to be responsible with the necessary loan repayments.
7. Check the loan terms
Lenders vary when it comes to the restrictions of your personal loan. Some will have limitations about what you can purchase with your borrowed money. A good example is a car loan, which may often not extend to cover the purchase of insurance or rego. Checking the loan terms first will help you be approved by making sure you don’t apply for something that’s not actually allowed. To save application time, it’s best to check out the restrictions beforehand. That way you don’t fill out lengthy paperwork before realising you can’t finance your car with your personal loan.
8. Meet any secured asset requirements
Applicants who don’t have secured assets that can be used as collateral will have a harder time getting approval for their personal loans. Most lenders will also think it’s risky if the assets you have are too low value to be used as security. If you’ve got something better than your old Honda Accord to used as secured assets, make sure it’s shown in your financial paperwork. This way you’ll stand a higher chance of being approved. You can compare secured personal loans here.
9. Be honest!
As we’ve mentioned, loan providers will always do background checks on the personal information you provide. Lying on your application is a good way to increase your chances of rejection. Even worse, you’ll most likely be blacklisted with the bank or financial provider, making future approvals close to impossible. To improve your chances of approval, be honest on your application.