Tips to Minimize Being Denied for a Signature Loan
Written by: Kristy Welsh
Last Updated: October 11, 2017
Are you planning to take out a personal loan to meet a pressing need for funds? If the thought of having your loan request denied has you upset, here are some steps you can take steps to avoid having your signature loan application denied. You will never know exactly when you will be in need of a personal loan, so be sure to closely monitor your credit report and promptly correct any erroneous entry you find. It takes a while to get your credit report corrected and you may not have the time to do so when applying for a personal loan. Know your credit score and be aware of the acceptability of your credit to lenders.
Provide Accurate Information on Loan Application
When you are applying for a signature loan, make sure to provide only correct and accurate information. Submit the required documents including verifiable proofs of residence, income, and employment. Should your credit report include unfavorable items related to circumstances of which you have no control, it may be a good idea to attach a short but direct self-explanatory letter. It is important for you to show your credit responsibility and offer evidence on your efforts to resolve the situation. The information you provide can be of big help to the account officer and loan underwriter in obtaining approval of your loan application.
Offer Collateral to Secure the Loan
While the best type of loan to obtain is the unsecured personal loan, there are some cases when the lender would require some form of security or collateral to ensure repayment. If it is the only option available, you can offer any valuable asset that you legally own like vehicle or real estate. However, be aware of the risk this entails. You could lose your property in case you default on your loan or if you do not fully pay it back.
Get a Co-Signer
Another alternative to obtain approval for your personal loan is to present a co-signer, someone who will act as a co-borrower and assume the same legal responsibility of paying back the loan. When you ask a friend or relative to co-sign your loan documents, you are effectively putting him at financial risk if you fail to satisfactorily pay down your loan obligation. Whoever agrees to co-sign your loan trusts you very much and you must exert every effort to keep that trust. Therefore, give priority to religiously meet the monthly payments on that loan to avoid ruining your relationship with your co-signer.
If You Have Poor Credit, Consider a Bad Credit Loan
It is not advisable to file loan applications with different lenders at almost the same time but if your application was rejected by one lending institution, it may be a good idea to seek other potential creditors. Lenders use different methods in evaluating and approving loan requests. If your credit rating is less than good, you may want to apply for a "bad credit" loan with specialized lenders. However, do make sure that you are dealing with a legitimate financial institution and not some scammer who take advantage of people with the same circumstances as you have. Although this type of personal loan carries higher rate of interest, you can be assured of being granted credit. Treat this as an opportunity for you to do some credit repair work primarily by making prompt monthly payments.
It can be very frustrating to have your application for a personal loan be rejected. Try your best to obtain credit approval during your first filing. Be truthful in your personal loan application. Lying can and will only get you in trouble. An honest explanation of issues in your credit history can help the lender understand better your particular circumstances. Take your credit seriously and do keep a good credit standing so that "poor credit" will never again be an issue in your future loan applications.
Needless to say, you will have to give top priority to repaying your personal loan once you get one. Promptly paying your monthly amortizations will ensure you that when the time comes you will again be in need of financing, you won't have much difficulty in finding a lender. Much weight is given to borrowers who have shown ample credit responsibility. Securing your personal loan with collateral or co-signer makes it more imperative for you to make timely repayments.