Mistakes to Avoid when Applying for a Loan

Nowadays, having a personal loan is almost a necessity. We can easily fund our homes, purchase our dream cars, or even go on vacations. Loans put money in our pockets. Yet applying for a loan isn’t a straightforward process. The entire process involves exhausting paperwork and requires patience. Besides, lenders must thoroughly investigate the risk we pose before preapproving our loans. With a little preparation and foresight, we can get our loans approved much faster. Below are the mistakes to avoid before and during loan applications.

 

Poorly Written Application

Loans require utmost care when being filed. A single omission of an answer could be the difference in whether we get that auto loan. Alarm bells are raised if we make errors when submitting information such as our net worth, credit history, names, jobs, to name a few. Lenders will perceive us as fraudulent, insincere, or suspicious people and use it as a basis for loan rejection. I always use the services of a financial broker in my loan application. These brokers are well-versed with this process. They ensure I have the relevant loan documents and any letters required. Financial brokers are also well-trusted by lenders.

 

Failure to Know Credit Ratings

When we think of loan applications, we should always be aware of our credit ratings. Lenders use these ratings to identify the risk level we pose. Our loan applications will be rejected if we have issues or low credit scores. We also attract unfavorable interest rates if our credit scores are too low. The rule of thumb is to check our credit with agencies like Transunion, Equifax, and Experian, before applying for a loan. Another problem that arises is when we have too many inquiries on our credit. We should only allow credit file access to our preferred lenders and not all lenders on our list.

 

Bad Savings History

Lenders always scrutinize our financial history before approving or rejecting our loan applications. One key area they pay attention is our savings. They prefer situations where we have a stable income and regular saving patterns. Lenders base this information on the past six months. Approval is guaranteed if we have substantial savings or proof, we can meet monthly repayments. A lump sum on our savings accounts just before the loan application will raise eyebrows. Lenders also have reservations when they encounter seasonal bank movements in our financial documents.

 

Failure to Justify Loan Use

We borrow loans to meet needs such as home improvements, home buying, medical emergencies, and purchasing a car. Whatever the reason, we should indicate the loan purpose in our applications. Lenders will trash our applications if our justification for a loan doesn’t meet the required threshold. The more open we are to lenders, the more likely they will approve our loans.

 

Recent Employment Change

We are always thrilled whenever we get a new job. However, not everyone is excited about such news. Lenders loathe applicants who frequently change jobs. Contrarily, they love individuals with stable jobs. When we change jobs, lenders view us as unstable and might default on our loans. Moreover, many organizations have a three to six-month probation period for new employees. During this time our salaries might be half or slightly less. Lenders cannot carry out income assessments until the probation period is over.

 

Borrowing Beyond Means

Deposit amounts and other income requirements usually accompany loans. The required threshold varies from lender to lender. Before applying for a loan, we must have the required funds. In most cases, available funds indicate our financial position and seriousness in getting a loan. A large loan will demand significant deposits. There’s no way a lender will lend such loans if we can’t raise the deposits required. When it comes to small loans, most lenders have little problems approving loans.