Lenders use a number of factors to determine loan eligibility, including your credit score, payment history and debt-to-income ratio. In most cases, a lender will want to see that you have a credit score of at least 670 and enough consistent income to pay your bills each month. If your credit score is lower than that threshold, you might want to consider applying with a cosigner. A cosigner can help increase your chances of approval because he or she is responsible for paying back the loan in the event that you cannot.
Other types of income you might need to provide include government benefits, child support or alimony. Providing these types of documentation can give your lender a more complete picture of your monthly earnings and your ability to repay, which could qualify you for a higher loan amount.
Your employer will probably need to verify your employment and income before making a lending decision. This usually involves a phone call or fax from your employer's human resources department to confirm that you are employed and that the information on your application is correct.
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Providing your financial and employment documentation quickly can speed up the process and reduce processing delays. It can also help you avoid having your loan application rejected because of missing or inaccurate documentation. If you do experience a rejection, it is important to understand why so that you can take steps to correct the issue. This might include reapplying with another lender, paying down debt or fixing errors on your credit report.
Finding a Lender
If you want to borrow money for a variety of personal expenses, including paying for debt consolidation or home improvement projects, there are many options available. But determining which lender to work with can be difficult. Start by researching lenders and comparing loan offers, including terms like annual percentage rate (APR) and fees. It’s also a good idea to consider other factors, such as loan purpose restrictions and repayment flexibility.
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Most personal loans are unsecured, which means they’re not secured by collateral like car or home equity. As a result, lenders evaluate other financial indicators when determining eligibility for personal loans, such as credit history and income. Applicants with lower credit scores may have a harder time qualifying for a personal loan, but it’s possible to boost your chances of approval by improving your financial standing before applying.
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