Many people need a personal loan to cover an unexpected expense, make a large purchase, or consolidate debt. However, getting approved for a loan can be challenging, especially if you don’t have a good credit score or a strong financial history.
Fortunately, you can take several steps to increase your chances of getting a loan. From understanding your credit score to finding the right lender, these tips can help you secure a loan. Read more to find out how to improve your chances of getting approved.
7 Ways to Improve Your Chances of Getting a Loan
Securing a loan can be crucial to achieving your financial goals, but getting approval is not always easy. Below are some loan application tips to help you achieve favorable results.
1. Improve your credit history
Lenders often take credit history as a major consideration when giving out loans. The higher your credit score, the more chances of your application getting approved.
To improve your credit history, pay your debts on time and in full. It would also help if you spent less than your credit limit to avoid paying additional fees and increasing debts. On a broader level, avoid getting involved in foreclosures or bankruptcy that can impact your credit history.
2. Apply for the right loan amount
Lenders will likely reject your loan application if you have a high debt-to-income ratio. To compute this ratio, divide your monthly total debt payment by your monthly gross income and multiply the amount by 100.
For instance, if you have a monthly income of ₱30,000 and a monthly debt of ₱10,000, your debt-to-income ratio is 33%. You have a better chance of getting a loan with a low ratio because it shows lenders that you can pay your debt. On a more personal level, it ensures you can pay your debts and have enough money for other financial goals and obligations.
Aside from your debt-to-income ratio, consider interest rates, loan terms, and fees before applying for a loan.
3. Provide proof of income
Between full-time employees and freelancers, the former have better chances of getting approved for a loan because they have stable sources of income and more capabilities to pay their debts. However, if you’re the latter, you can still apply for loans if you provide proof of income.
Lenders will likely request a copy of your income tax return (ITR), financial statements, licenses, and permits. If you have multiple sources of income, mention them to the lender to become eligible for a higher loan amount and increase your chances of getting approved.
4. Find a co-borrower
If you have a poor credit history or insufficient proof of income, consider getting a co-borrower or someone who can help you get a loan you couldn’t obtain independently. They can be your guarantor, assuring your lender you can repay your loan.
Note that your co-borrower should have sound financial credibility—including a high credit score, a stable income, and little-to-no debt—and an ownership interest in what you plan to purchase with the loan to ensure you get your desired terms.
Additionally, know that a co-borrower is different from a co-signer. The latter is also responsible for paying for the loan if you default on it, but they don’t get to say it’s theirs or control what you use it for.
5. Be ready with your application documents
Loan requirements vary from lender to lender. However, some of the most common document requirements for loan applications include a copy of your valid ID and proof of income. Contact your preferred lender to get a checklist of loan application requirements.
Additionally, check your prospective lender’s list of eligibility requirements. In the Philippines, you must meet the following qualifications:
- Must be at least 21 years old;
- Must be a Filipino citizen or foreigner permanently residing in the Philippines;
- Must have a working landline number; and
- Must be employed or self-employed, depending on the lender’s requirement
6. Compare lenders
Avoid settling for the first lender you see, as you may have unfavorable loan terms and interest rates. Thoroughly research different financial institutions and narrow them down until you find a lender that suits your needs.
Ensure you check their legitimacy, understand their loan terms and conditions, assess their loan products, and review their data policies. By doing these checks, you can avoid settling down with a bad lender and paying more.
7. Avoid applying for many loans simultaneously
Some people tend to apply from multiple lenders to increase their loan chances. However, this method isn’t always advisable as it can hurt your credit score. It could also make you appear financially unstable, reducing your chances of being approved for the loan or resulting in higher interest rates.
Meet Your Financial Goals with a Reliable Lender
If you’re considering applying for a loan, understand that this financial decision can significantly impact your credit score, debt-to-income ratio, and overall financial health. Therefore, it’s crucial to research lending alternatives thoroughly. Use the tips above to increase your chances of getting a loan and, ultimately, achieve your financial goals.
When finding an online loan in the Philippines, make Asialink Finance one of your top lender options. We offer accessible, fast, and convenient personal loans to help Filipinos reach essential life milestones and financial goals. Apply for a loan with Asialink Finance for a low-interest online loan.