Applying for a loan is not always as easy as it seems. All lenders look at your financial history in order to determine if you are eligible or not for their services. However, there are other details that establish what interest rates and terms you will be offered. All of these are based on your previous loans, your credit score, and your relationship with the lender.
In other words, if you want to increase your chances of getting a loan and to ensure that you will get a low interest rate, you will have to do a bit of financial housekeeping prior to submitting your application.
There are 4 methods that you can use in order to both increase your chances of getting a loan, as well as make the terms and conditions more favourable. Here is what you need to do:
1. Work towards building up your credit rating
One of the first things that you should always do when considering using the services offered by banks is to build up your credit rating. This score is essentially a track record of your financial decisions and behavior. It is used by lenders in order to establish if you should get a loan or not, and it also plays an important part in deciding what interest rate will be attached to the agreement.
Building up your credit rating takes a long time, however, there are a few things that you can do over the course of a year, in order to increase your chances that you will get a loan and that the terms and conditions will be in your favor.
Consolidate your debt as much as possible, pay off your credit cards, and make sure that you do not miss any monthly payments for the debt that you already have. This will show lenders that you know how to manage your finances and that you can be trusted with a larger loan.
2. Check your credit report and make sure that everything is in order
While it is uncommon for a credit report to contain mistakes, it is not impossible. Always check your credit report prior to submitting your application for a loan and pay special attention that it does not contain mistakes regarding how much credit you are using or your current debt. This having been said, you can request access to your credit report using the website of one of the three credit reference agencies in the UK: Experian, Equifax, or TransUnion.
3. Make sure that the information in your application is correct and accurate
Most lenders look at the information that you provide in your application and verify it. This means that any mistake or inaccuracy contained within can affect your eligibility status and may lead to the lender refusing to give you a loan.
Before submitting your application, take the time to verify its contents. Make sure that it does not contain any spelling mistakes and that the information included in it is correct (check the address, contact information, income, and debt values, etc.)
4. Do not submit too many applications
If you submit a large number of applications in a short amount of time, lenders will conclude that you are unable to manage your finances and may not be willing to give you the loan. Try to space out your loan applications by at least 3-4 months.
These are the basics when it comes to preparing to submit a loan application. Although it may not seem like anything too complicated, a large number of requests are turned down as a result of carelessness. If you want to get a loan, build up your credit rating, check your report for mistakes, ensure that the application is written correctly, and space out your loan requests.