Getting a Personal Loan: How to Know If You’re Eligible

Getting a Personal Loan: How to Know If You’re Eligible
July 21 06:49 2018 Print This Article

To have the best chance of getting a personal loan application approved, you should find out what requirements you must complete in order to be eligible.

Applying for a multipurpose personal loan is a major financial step. If you are not careful with managing your finances, you may end up with a massive debt that may take you forever to pay off. That is why lending institutions establish requirements and credentials that would help them identify the best candidates for a loan.

Here’s a guide to help you determine whether you are eligible for taking out a loan.

1. You must have a stable source of income.

For a lender to have the assurance that you can successfully repay your loan, you must be employed or have a solid source of income. A lending institution will either set a minimum income for you to earn or only require that you must earn a steady, permanent income. If your case is similar to the latter, you should determine whether you can afford the loan you’re applying for with the current budget that you have.

Employment requirements may differ among lending institutions. In some cases, you may need to have “regular” employment and must not be casually employed. On the other hand, there are other lenders who may only require extra details for borrowers who are self-employed.

Lenders usually verify your income through the following information:

  • Income details, which include tax returns and pay stubs
  • For self-employed individuals, any document that proves income or tax returns from the previous two years
  • Financial details like banking statements or any type of income

2. You must have proof of your identity.

Financial institutions will only lend money to individuals who can prove their identity and place of residence. Moreover, they will do a background check to ensure that you aren’t fraudulent — that you really are who you say you are.

In most cases, lenders will require at least two proofs of your identification. These can be any of the following:

  • State ID
  • Passport
  • Driver’s license

Additional supplementary documents may also be needed in the form of:

  • Birth Certificate
  • Military ID
  • Utility Bills
  • Certificate of Citizenship

3. You should have a financial past stating that you’re a good borrower.

Lenders run credit checks to find out whether you’re a good borrower or not. This would also highlight potential concerns concerning your credit history. If your credit history is alarming, you may end up with a declined loan application.

It’s crucial that you review lender or bank terms and conditions to secure your likelihood of getting a loan. Most of the lenders’ eligibility criteria will ask you to meet the following prior to your loan application:

  • No unpaid debts or payment evasions
  • Never had any court judgements against your name
  • Not currently bankrupt and has never experienced bankruptcy in the past

If you have experienced bankruptcy or you have unpaid debts and court judgements, your credit check may return an automatic decline. Credit checks will also look into how often you’ve applied for credit in the last year. Any more than the number of applications set by your lender will be unfavorable to your credit score.

4. You should know your assets, debts, and expenses.

During the loan application process, you may be asked to list down your debts, expenses, and assets. The information will also contribute to whether you’ll be approved for a loan or not. Assets can help you boost your application while debts such as store cards and credit cards may hinder your application approval.

Expenses are usually projected. However, don’t be too nonchalant as lenders can tell whenever you are overestimating or underestimating based on the data given by other borrowers.

Are you eligible?

If you are still unsure whether you would qualify for a personal loan, use the following tips to give your loan application a boost:

  • Reduce the limit of your credit cards if you are not using them soon to prevent lenders from seeing these as a potential debt.
  • Pay off some of your debts before applying for a loan.
  • Open a transaction account with the lender to establish a history and help speed up your loan application process.
  • Before you apply for a loan, make sure that you’re no longer on a probation period in your place of employment.

Although no personal loan application is ever guaranteed approval, this guide will give you the best chances of getting a positive result. Always check with your chosen lender about their requirements to ensure that you have everything you must provide.

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Salvador Knight
Salvador Knight

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