7 Tips To Boost Your Personal Loan Approval Odds
- You can significantly boost your odds of getting a personal loan by improving your credit, paying off debt and earning a higher income.
- You can also improve your odds with quick wins like disputing credit report errors, prequalifying, applying with a co-borrower and borrowing less.
- Every lender has its own eligibility criteria, so it’s possible to find loans for bad or no credit. These loans typically come with higher rates, making them more expensive.
Need to borrow money and want to know how to boost your chances of getting a loan? You’re in the right place. We’ll share the fastest ways to improve your odds, then list expert LendingTree tips for more effective long-term strategies.
Quick ways to boost your odds of getting a personal loan
Check your credit report
Errors on your credit report could keep you from getting approved for a personal loan. Inaccurate information — like a missed payment that you did make — or unauthorized use of your credit due to credit fraud could hurt your credit score and make you look like a risky borrower.
Check your credit report for free at AnnualCreditReport.com. Look for any errors that could bring down your score like large debts you don’t owe, unfamiliar credit inquiries or even late payments. Then dispute any credit report errors you see. If your dispute is successful, the negative mark will be removed from your report and your score will recover.
Credit monitoring can be a powerful tool for keeping tabs on your credit health. Credit monitoring services typically offer suspicious activity alerts, regular credit score updates and identity theft restoration assistance.
Prequalify before formally applying
Many lenders let you prequalify for a personal loan to see your potential offers with no impact to your credit, since prequalifying comes with a soft credit pull. Prequalification is a strategic way to avoid the hit to your credit that comes with the hard credit pull that lenders do when you submit a formal loan application.
LendingTree experts recommend prequalifying for several loans, then taking a credit hit by submitting a formal application once you’ve had a chance to review several offers. Note that prequalifying doesn’t mean guaranteed approval, but it’s a low-risk way to shop around.
Don’t apply for too much money
Lenders are more likely to approve a small loan than a larger one, since it minimizes their risk. If you’re on the cusp of personal loan eligibility, it’s smart to reduce your risk as much as possible by applying for less money.
Take a hard look at your budget and decide how much you actually need to cover your expenses. Look for ways to reduce your costs, then only apply for what you absolutely need.
Adding a cosigner or a co-borrower
Adding a cosigner or co-borrower could significantly improve your personal loan approval odds, especially if your co-borrower has good or excellent credit. A co-borrower with strong credit functions as a guarantee that the lender will get their money back.
Cosigned loans come with risks. If you take out a joint loan, your co-borrower will have equal rights to the loan money, and missing or late payments will affect your co-borrower’s or cosigner’s credit.
Long-term strategies to boost your odds of getting a personal loan
Improve your credit score
Personal loan requirements vary by lender, but your credit score is one of the most important factors in getting a personal loan. It’s much harder to get a loan with a credit score below 580, and if you do get a loan for bad credit, it will likely come with a steep APR that will make your loan expensive.
To improve your credit score, focus on paying your bills on time and in full since payment history is worth 35% of your FICO Score. It’s not an overnight process, but small actions like on-time payments can have a big impact on your credit in the long run.
Pay off debt
Lenders also consider your debt-to-income ratio when deciding whether to approve you. Common financial advice recommends keeping your DTI ratio below 36% when seeking new credit, but proprietary LendingTree data shows that your odds drop most significantly when your DTI ratio hits the 50% benchmark.
To lower your DTI, choose a debt repayment strategy that works for you, like the debt snowball method or the debt avalanche method. Look into credit counseling if you want someone to walk you through your options and give you the tools to break bad financial habits.
Increase your income
Your income is an important factor in personal loan approval. Some lenders have minimum income requirements, while others reserve their best rates for people who make more than a certain amount.
In general, the better your income, the more likely you’ll get loan offers — but your credit also plays a huge role.
It’s easier said than done, but invest time in earning more money. Ask your boss for a raise — 82% of full-time employees who asked for a raise got one, according to a recent LendingTree study — or start a side hustle. If you take on a second job, you might be able to include it as a steady source of income, tipping the scales in your favor when it comes to your debt-to-income ratio.
Frequently asked questions
It depends on your credit score and history and the lenders you choose. If you have good to excellent credit, you’ll likely have an easy time qualifying for a loan as long as you apply with several lenders.
If your credit is below 670, focus on lenders that offer loans for fair credit or bad credit. There’s no guaranteed approval, but you’ll likely have a better chance of getting a loan if you start there.
If you’ve been denied for a personal loan, look into a secured loan or a secured credit card. These options can help you build credit by making payments on time and in full. This can help you get cheaper, better financing options in the future.
Many online loan lenders boast same day approval, but this might be unlikely if you have a complicated credit history. Brick-and-mortar banks can take longer than online lenders, but maybe not if you already bank with them.
Additionally, including a cosigner or co-borrower may extend the approval time, as the lender will need to check two credit histories instead of one.
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