Dreaming of a new car, a big wedding or a dream holiday? Or maybe you want to consolidate your debts into a repayment that saves you on ongoing fees? A personal loan is a gateway to removing financial obstacles so you can achieve your dreams, but like any financial decision, it shouldn’t be rushed.
Read our guide to understand how to prepare for a personal loan application and what to do to improve your chances of being approved.
It may be tempting to rush the personal loan process, but taking the time to be practical and strategic can help you secure a loan that suits your needs. Do these six things before you apply for a personal loan to make the process easier and increase your chances of approval.
Before you start researching personal loans, take some time to consider how much you exactly need.
It’s easy to apply for a large personal loan and avoid using any money you currently have, but borrowing more than you need can put you in unnecessary debt. Take the time to evaluate a reasonable figure from the beginning so that you have less to repay later.
Start by calculating how much of the personal loan you need to spend. Is there any money you already have that can contribute towards that purpose? If so, subtract that amount from what you need to borrow and add a little leeway. The final number is how much you need to borrow for your personal loan.
Your credit score is likely to be the main factor lenders look at when assessing your personal loan application. Lenders will be looking at your credit rating to gauge your financial history. They’ll be able to see how much debt you have and whether you have consistently made repayments on time.
Before you start comparing personal loans, do due diligence on yourself and look at your credit history with the eyes of a lender. How do your finances look? The higher your score, the better interest rate and loan terms you are likely to get. If you have a low credit score, you may be at risk of being turned down or charged a higher interest rate.
If your credit rating is on the lower side, it’s a good idea to take some steps to improve it before you begin applying for a personal loan. Try to pay off credit card balances, outstanding debts, and be sure to check for any errors. Mistakes on credit reports do occasionally happen.
If you are confused by this process, you may want to engage a personal loan lending specialist to help you understand your credit score.
Make sure you can fit personal financing into your budget by planning your repayments before you apply for a loan. Most lenders will check that you can afford to repay personal loans without substantial hardship. Some may ask for proof of income, liabilities and living expenses when assessing your application, so make sure you can easily make repayments to improve your chances of approval.
Start by reviewing your monthly budget and expenses to calculate how much you can afford to pay each month without being burdened. Consider rent, bills, household expenses and any existing repayments you have. Add on an amount to put away for savings. Anything left over can go towards your loan repayments.
Taking out a personal loan is a big decision and you want to choose the right lender with appropriate loan terms that suit you. Take your time to do your research and find the right lender. You can use comparison sites or a personal lending specialist who can find and tailor the right personal loan for you.
When comparing personal loan lenders, look at terms like interest rates, repayment schedules, minimum or maximum amounts, prerequisites and restrictions on the use of the money. Think of your personal loan as a long-term relationship and make sure you’re a good match with both the lender and the loan before you apply.
When you’ve found the right lender and personal loan for your needs, make sure you meet their eligibility criteria before you start the application process. This will prevent any unpleasant surprises along the way.
Most places will require you to have an acceptable credit score, be an Australian citizen at least 18 years old and earn a regular income. You may also need to earn a minimum salary per year, have been employed for a certain number of months or years, and have no defaults or current payday loans.
Sometimes the hardest part of a personal loan application is preparing all the necessary documents. Not having the right documentation ready can slow down your application, especially if you want a same-day loan approval.
Most lenders will ask for a government ID, proof of income, employment details, and bank statements. Some may also want a list of current assets, debts, and an idea of your living expenses. Get these ready ahead of time and you’ll be one step closer to securing your personal loan.
Researching, comparing, and applying for personal loans can be an arduous process. Save yourself time and let our lending specialists find and tailor the best personal loan for your needs.
We will start by asking you for some details, including the amount you want to borrow. Then we’ll compare our panel of lenders to find you the best personal loan with the lowest rates and flexible terms that suit your budget.
If you’re happy with the conditions, we’ll move quickly to get you approved and verified as soon as possible. Before you know it, the funds will be in your bank account ready to spend.
Nathan joined Fox Finance Group in 2018 to help drive the strategic growth of the business and also help build on the solid foundations that have held strong in the business since 2006.