Applying for a loan is a lot like applying for a job—you fill out the application, make sure all the required materials are just right, send it off, and eagerly wait to hear back. But before most people even touch a job application, they make sure to set themselves up for success. Applying for a loan should be no different! By following our three-step plan, you’ll increase your chances of getting approved for the personal loan you need.
Step One: Engage in Healthy Financial Behaviors
Keeping your credit score in tip-top shape takes some effort, but those healthy financial behaviors quickly become habits and pay off in the long run! Before submitting your loan application, make sure that you’re applying as many of the following best practices as you can:
Double Check Your Credit Report
One FTC study found that one in five individuals have an error on at least one of their credit reports. While this may not seem like a big deal, one small inaccuracy can mean the difference between a loan approval and a disappointing denial. Removing incorrect information from your report can take some time, so we recommend checking your credit at least 45 days in advance of applying for a loan.
Have Steady Employment
Your income plays a vital role in the loan approval process. Lenders want to see that your income comes from a steady, reliable source and that you’re earning enough to make consistent loan payments. If you can, try to keep your work situation consistent in the months leading up to submitting your personal loan application. By demonstrating that you’re a responsible and reliable applicant with the income required to repay the loan, you’ll increase the likelihood of your acceptance.
Minimize the Impact of Multiple Inquiries
Did you know that when you apply for a loan, a “hard inquiry” is added to your credit report? Though they only stay on your report for two years, adding several hard inquiries to your report in a short period of time can harm your score. If you plan on applying to more than one lender, be sure to finish those applications within a few days or weeks of each other. Typically, multiple hard inquiries for the same type of credit product (i.e., a loan) are counted as a single event on your report as long as they occur close together.
You can also request what’s known as a “soft inquiry” from a lender in the form of a preapproval or prescreening. For example, when you apply for a personal loan with Credit Direct, you’ll see exactly what loan offers you are pre-qualified for before choosing to finalize your application. This allows you to “try before you buy” and won’t affect your credit score.
Step Two: Get Your Documents in Order
The key to smoothing out your experience with a loan application is to make sure you have all the necessary documents ready to go before applying. By having everything in order, you’ll save yourself the time, energy, and stress that comes with scrambling to find your passport or requesting your W2s.
It’s important to remember that different lenders require different documents. While shopping around to find the loan provider that’s right for you, take note of what records are necessary and have those on hand before applying. Here at Credit Direct, for instance, we ask for the following documents to finalize the application after an applicant accepts a loan:
- Any and all bank statements from the past two months
- Any and all pay stubs from the past month
- Most recent W2
- Copy of a government-issued ID (typically a driver’s license or passport)
Step Three: Choose the Lender that’s Best Suited for You
Lastly—and most importantly—you’ll want to select a lender that’s well-matched to your specific loan needs. The reason why there are different types of lenders out there is that no two borrowers are exactly alike! Each loan provider is tailored to different kinds of customers. Some might want a more traditional loan experience, while others seek a flexible, modern alternative to a typical personal loan. This is where online lenders have a few advantages over branch-based lenders.
Online Lenders Are Convenient
Though both branch-based and online lenders typically let you begin the loan application online and upload the required documents to a secure portal, most traditional lenders require you to sign the final documents in person. With an online-only lender, the entire loan process is conducted conveniently on your computer, smartphone, or tablet.
Online Lenders Have a Faster Application and Funding Process
Because the initial application, document upload, and approval process can be done wherever you are; the entirety of the lending process can be much faster if you opt to take out a personal loan through an online lender. Instead of making multiple trips to a brick-and-mortar branch location, you can get the loan deposited into your account quickly and easily.
Online Lenders Offer Flexibility in Lending
Whether you have stellar credit or are working to build your score back up, an online lender offers you the flexibility you want when getting approved for a personal loan. By providing reasonable rates regardless of credit, online loan companies take away the stress associated with the traditional, branch-based loan process.
Regardless of the option you choose, you should read online reviews, browse the lender’s website, and connect with a consultant to learn more about what their approval requirements are before applying. To learn more about Credit Direct and our approval process, speak with one of our loan agents today at 866-414-4198. You also have the option to apply online now to check what offers you qualify for with no effect to credit score.