02 Mar Tips to get approved for small loans
Regardless of how financially stable you are, there will be times in your life when you’ll need to produce a large amount of money within a short period of time. If you suddenly lose your job, for example, you need to look for financial resources in order to still be able to provide for your family. Situations like these may prompt individuals to apply for small loans.
Before you work with a lender, make sure that you gather all of these documents:
Small loans come with several benefits. For one, applying for this kind of loan allows you to experience versatility because you’ll be permitted to borrow money regardless of the purpose. But before you can experience these benefits, you need to work on having your small loans approved first. Performing well during this process is vital as it can make or break your qualification to borrow money from a lender.
Different lenders will require different documents from you when applying for small loans
While some are very strict with the documents they need, others are very lenient. For you to save time and energy when applying and increase your chances of getting approved, it’s best if you gather all of your personal information beforehand. This will make it easy for the lender to assess your character and decide whether or not you’re capable enough to pay off the loan.
- Credit score: All lenders will require a copy of your credit score. This document allows them to see how well you manage your credit and what types of credits you have acquired in the past.
- Credit report: Your credit score will be computed based on the information from your credit report. When applying for a small loan, make sure to ask for your credit report from credit agencies, and check if the information stated is accurate.
- Identification: Lenders will also ask you to provide some identification documents which can include your Social Security card, driver’s license, and other IDs issued by the state. The more IDs you can present the better.
Your credit score is an important deciding factor for lenders to approve your application in getting small loans. Since your credit score can speak volumes on how well you handle your credit in the past, this can make or break their decision in approving your small loan.
If you don’t want poor credit score to become the reason why you’ll be denied your small loan application, make an effort to improve your credit score first. Depending on your current score, you might need to spend weeks or months to do the following:
- Pay down all of your debts: As mentioned, your credit score can determine how well you manage debts. If you currently have a lot of debts, the lender will be hesitant to approve any pending loan applications thinking that you’ll have a hard time paying for all of these at the same time. Make sure that your credit score shows a healthy debt-to-income ratio by paying down all of your existing debts before applying for any small loans.
- Consolidate payments: Consider consolidating several debts in one payment scheme to enjoy cheaper interest rates. If you have an existing student loan, for example, check if you can consolidate this with other loans for lower interest rates. Consolidated payments will make it very easy for you to pay existing loans and, in some cases, help you save money on paying interest rates, too.
- Clear up any mistakes: It’s best if you acquire your credit report early so you can check the accuracy of your records and have it corrected if you see any mistakes. For example, your credit report might show as existing a loan you already paid years ago, so it’s always essential to check every line of the document.
Regardless of the amount of money that you’re planning to borrow, lenders would always want to know if lending you money is a safe bet. This is because it’ll be challenging for their businesses to progress if they end up lending money to individuals who can’t afford to pay them back.
To prove to your lenders that you have the capacity to pay off your small loans, present documents that prove that you have a stable income. If you’re employed, provide a copy of your bank account statements and tax returns. You can also show proof that you have other sources of income, such as royalties from artwork or annual financial gifts.
Aside from knowing how to get approved for small loans, it’s also important that you exert time and effort in finding the right lender. With the number of people in need of money, expect that you’ll come across several businesses that offer small loans.
For you to end up with the best lender, make sure that you spend time to scout for at least three options, and compare their offers. It’s important that you carefully compare several services so you can easily determine which one is the best for you – especially when it comes to the paying terms.