Factors That Impact Your Personal Loan Approval
When you’re trying to get a personal loan, you may wonder whether your application will be approved or denied. While this is a common question, it’s also one that can only be answered by the lender. As such, many factors impact how likely it is that a loan will be approved.
A good credit score is between 700 and 850, so if you have a score of 780 or higher, you’re in the best position to qualify for a personal loan. If your score is lower than that, it means some things need to be addressed before you can secure financing.
A poor credit score indicates that financial issues have negatively impacted your ability to pay bills on time or at all, which makes lenders nervous about lending money to people with bad credit. Someone with poor credit may also have difficulty finding other types of loans in the future because they haven’t shown an ability to responsibly manage their finances in the past.
A low credit rating could limit your options when it comes time for any kind of financing—whether personal or business-related—so make sure yours is as high as possible before applying!
• How long you have had credit: This is the length of time that you have been in the market and how long your credit history has been established.
• How often you use credit and how much you use: This includes the number of times that you apply for a loan or credit card every year.
• The number of times that you have been denied in the past: If it is high, then this will also work against your favor.
Your employment status
A big part of the loan application process is verifying your employment status. This is because lenders want to see that you’re able to pay back the loan, and having a stable income is one of the best ways to show this.
Your income level
The second factor that impacts your personal loan approval is your income level. This is important because it’s used to determine how much you can borrow, and, depending on the type of loan you qualify for, what kind of interest rate you’ll get.
If your income is too low, you may be denied a loan altogether. To be approved for a personal loan with LendingClub, borrowers must have an annual income above $40K and not have more than 20% debt-to-income ratio (TDI). For example: if your annual salary is $50K per year and your total debt equals $30K (20% TDI), then they would approve up to $15K in financing for such an applicant ($50K – $30K = 20% TDI; $15K x 20%).
The reason for the loan
Personal loans are used for a variety of purposes. This means that you may have a variety of reasons for needing the money. But many factors will determine whether or not your application will be approved, including:
• Your credit score
• Your income level
• How long you’ve been employed
Let’s take a look at these in greater detail.
Experts like Lantern by SoFi say, “The loan may increase your burden of debt and can trigger anxiety due to financial stress.” So consider all the pros and cons before taking a 5,000 dollar loan.
As you can see, there are a lot of factors that will affect your personal loan approval. You should make sure that you have all the information before you apply for your loans so that they can be approved quickly and without any hiccups.