Do you think you need a personal loan? You’ll have to apply for one, but if you want to be sure you’ll qualify, you’ll definitely want to consider these tips, facts, and steps to increase your chances of getting approved.

What Do You Need the Personal Loan For?

The first step to qualifying for a personal loan is understanding exactly what you need the money for. The reason you need the money may actually impact the type of loan you apply for.

Personal loans can be used for a variety of things, but there could be some restrictions. For example, most personal loans can’t be used for down payments on houses. You also want to consider if other types of loans will come with lower interest rates. Auto loans tend to have lower interest rates than personal loans. It’s generally not recommended that you use this money on vacations or jewelry though.

You’ll also need to consider just how much money you need. You don’t want to borrow too much or you may not get approved. You also don’t want to borrow too little or you may have to go after another loan in the near future.

What Do Lenders Look For in Applicants?

Understanding what the lender will look at will help ensure you have all your ducks in a row when you apply for a personal loan. Some factors the bank or credit will consider include

• Credit score

  • The higher your credit score, the more likely you are to qualify

  • Scores should be 600 or higher

• Credit history

  • Do you pay on time regularly?

• Income

  • The minimum income required will depend on the bank or credit union

• Debt to income ratio (DTI)

  • Less than 36% is often required, but some lenders only request 50%

In some cases, your lender will ask for collateral. If you default, these items will be repossessed. Borrowers may also have to pay fees when approved.

Finding and Applying for a Personal Loan

Now that you know what a lender is looking for and how to consider what you need, it’s time to find loans that fit what you’re looking for and apply to them.

Starting with your bank or credit union is a good point, but don’t stop there. You’ll want a few offers to compare to one another to see which offers the best interest rates and terms. Don’t go crazy though either – applying to too many can damage your credit score. Talking with a loan officer at the organization though can lead to a more personalized and helpful experience.

When applying for loans, always be as honest as possible. Lying on these forms can cause you to not receive the amount, but also be charged with fraud.

How to Qualify for a Personal Loan

Understanding your financial needs is key to applying and qualifying for a personal loan. If your credit score is a bit low or you have a high DTI, you may need to work on them a bit before you can be approved.