Many of us have had our financial circumstances adversely affected by the Coronavirus pandemic, as countless thousands of jobs have been lost, and working hours have been reduced. Despite this, our outgoings remain the same and so we find ourselves on the breadline desperate for any help that we can get to tide us over this stressful period.
One option is to apply for a loan, but it is often difficult to know where to start as the criteria can be vague and we have no idea what factors will affect our chances of receiving the loans that we apply for. To help out people in this situation, we have compiled this handy guide to the factors that will affect your personal loan approval, so read on if you want to find out more.
Your Income
The first thing that any prospective lender will look at is your income and your expenditure, as they will want to know that you are capable of living within your means. If they see that you spend a large chunk of your income every month in the pub, or going on holidays then they are not going to look at your application favorably. On the other hand, if you show that you are capable of looking after your finances and that you don’t spend irrationally, then the chances of you being granted a loan will increase. If you have the income to cover loan repayments, you will have nothing to worry about, but don’t expect to be granted a loan with £500 per month repayments if you only have £200 of available income to spend.
Your Employment
Having a steady employment income is one of the first things a lender will look at when making an assessment on your application. Not only do they want to know that you have a job, but they will also look at the type of job, how long you have had it, and how stable it is. If you only work sporadically and are chopping and changing jobs all the time then questions will be asked, as you will not come across as the most reliable worker, therefore your ability to make repayments on time will be diminished. If possible, try to show at least 12 months of consecutive employment at the same employer if you want to increase your chances of having a loan approved.
Do You Have Other Debts?
Having a whole host of other debts can be problematic when it comes to loan approval. The lender will think of these debts before they even consider your application and will want to know that you are capable of taking additional lending onboard and can afford the repayments. Professionals from luckyloans.co.uk/personal-loan/ advise that most lenders will look at your debt to income ratio and if it increases above 35% then the view will be that you will not be able to sustain additional borrowing and the required repayment levels. If you can it makes sense to try and pay off your existing loans before you apply for a new one, as this will also show that you know how to manage your finances properly.
Too Many Applications
Each application that you make for a personal loan will appear on your credit report and too many applications that are refused will stick out like a sore thumb. Any lender that sees that you have been rejected by other institutions is automatically going to be wary of lending to you. When you go about applying for a loan it is important that you are aware of the lending criteria so that you can check if you will be eligible, and thus you will save yourself the pain of being rejected and then having your credit score lowered. Any loan inquiries will stay on your report for two years so it really is important to keep on top of any applications and only to apply to lenders that you have a better than reasonable chance of being accepted by.
As we have learned there are several factors that can affect your chances of securing a personal loan. Your income and expenditure will be looked at in detail to see that you can manage your finances correctly and that you can afford repayments, and your employment history will be checked to ensure that you have a stable income. Your other debts will be analyzed to see if you are making timely repayments and if you can afford another loan on top of your existing obligations, and be sure not to make too many applications as these are always noted on your credit score and will make other lenders wary.