Getting a personal loan can be useful for lots of reasons — today around 8 million Australians have a personal loan. However, anyone who has ever tried to take out a personal loan will know that there are certain barriers to get past.
In the past, we’ve talked about how personal loans work, the different types of loans available, and why you might consider getting one. But we haven’t yet talked about how to get accepted for a personal loan, and the concrete steps everyone can take to maximise their chances.
In this article, that’s what we’ll show you. First, let’s quickly recap some of the reasons why you might consider a personal loan.
Why Get a Personal Loan?
- To cover a large one-off expense like a major furniture purchase, a new vehicle, a wedding, or an upgrade to your home
- To cover emergency costs like a new washing machine, car repairs, or an urgent issue with your property
- To consolidate existing debts and make them easier to manage and repay
- As a more responsible alternative to a payday loan
How To Get Accepted for a Personal Loan
Clean up Your Credit Score
Optimising your credit score is one of the best steps you can take to boost your chances of getting accepted for a loan. It’s one of the first things your lender will check when considering your application, so make it a priority. Here are some things you can do to improve your credit score:
- Get a copy of your credit report and take some time to review it and find out which areas are in need of improvement
- Look for any errors in your reports, like closed accounts wrongly marked as open, and correct them
- Try to pay off your credit balance at the end of each month
- Make sure your bills are always paid on time — consider using automation software to help
Ensure Your Debts and Income are In Good Shape
When you apply for a personal loan, your lender will want to know about your existing debts and your current income (your debt-to-income ratio), since this helps them gain an idea of how likely you are to pay back on time and in full.
Ideally, the best way to improve here is by growing your income, either by getting a raise at work, moving to a higher-paying job, or starting up additional income streams. Obviously, however, this is far from easy and may be impossible in the time frame you need.
A more realistic and shorter-term solution is to work on paying down your current debts, focusing on higher-interest ones first.
Make Sure All Your Documents Are Accurate and Up-to-Date
Your lender will want to see evidence for your financial situation, and this is one area where it helps to be overprepared. Here are just a few examples of things to have on hand before you meet with a lender:
- Up-to-date copies of all credit reports
- All relevant documentation relating to any debts
- Proof of income, including recent pay slips, bank statements, and tax returns
- Evidence relating to other income streams
Work With The Right Lender
The right lender can make or break your personal loan application. Lenders all have different requirements and standards when it comes to things like credit scores, income, and lending options.
Take the time to shop around, talk to several lenders and find out which one is best for you. Try to pre-qualify for different loans, which will allow you to explore the different terms and rates involved.
Researching your lender beforehand also allows you to prepare for the application much more thoroughly based on what they typically accept.
Work With a Good Broker
Navigating the world of personal loans can be a tricky and confusing business. It’s easy to get bogged down in terminology and feel daunted by the process, and many people make mistakes and end up settling for worse terms.
Working with an experienced broker can make it much easier to apply and get accepted for a personal loan with the right terms for you. Brokers know how to guide you through every step of the application process to avoid mistakes and create the strongest application possible. They typically have their own network of lenders and can help point you to the right one for you.
At Lynam Home Loans, that’s exactly what we’ve been doing for our clients in Mackay and the wider Queensland area for many years. Contact us to find out more about how we can help you.
