How to Improve Chances of Getting Approved for Personal Loan

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By: Matt Diehl, Contributed by Kim Gallagher

Apr 25, 2024

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5 minute read

Summary

Looking to take out a personal loan but not sure if you'll be approved? Learn how to increase your chances of personal loan approval with these tips.

In this article:

Many people need to borrow money at some point in their lives. The reasons why and the loan amounts may differ, but one thing is always the same: They want their application to be approved.

If you plan to apply for a loan, here are some suggestions that could help improve your chances of getting a loan approved:

Check your credit report for errors

Fact-checking your credit report is the first thing you should do before filling out a personal loan application. The slightest error could alter the decision of a lender and should be addressed as soon as possible.

Checking your credit report for discrepancies is also a great way to protect yourself from identity theft. So, in addition to making sure your basic information is correct, check your report for the following errors:

  • Accounts you didn’t open
  • Charges you don’t recognize
  • Unexpected account balances
  • Unexpected hard credit inquiries

If you find unauthorized activity on your account, you can file an identity theft report with the FTC right away.

Remember, you don’t have to just accept your credit report at face value. If you find records of missed payments or other problems that you believe are inaccurate, contact the creditor or reach out to the credit bureaus directly and ask them to investigate.

Check eligibility before you apply

Have you ever received mail claiming you were “preapproved” for something you hadn’t applied for, like a credit card? This is because the company that sent it believed you may be a good potential customer. Sometimes lenders and other businesses will prequalify these individuals for certain offers.

On the other hand, prequalification involves providing your financial information to the lender for a basic assessment.

Every time you apply for a loan, the lender checks your credit to ensure that the loan is a good idea from a risk standpoint. Many lenders allow potential customers to check to see if they are prequalified on their websites.

While prequalification is not a guarantee of approval in most cases, it can save you time and increase your chances of getting a loan with that lender because it gives you a sense of how likely you are to be approved.

Second and perhaps more importantly, it can protect your credit score. Applying for a loan triggers a hard credit inquiry. Repeatedly applying for loans and being denied can have a damaging effect on your credit score. However, seeing if you prequalify for a loan first will not negatively affect your credit score.

Lower your debt-to-income ratio

One overlooked tip to increase the chances of loan approval is to improve your debt-to-income ratio, or “DTI”. This calculation is a percentage of how much of your take-home pay is used to pay your debts every month.1 The higher your DTI ratio, the lower your chance may be of loan approval. Some lenders may be more lenient if you have excellent credit or high equity in a home, but ultimately, DTI is all about how much income you have available each month to pay back the loan.

In order to lower your debt-to-income ratio, you’ll need to take a full assessment of your personal debt and develop a plan. You will need to either increase your income, lower your debt or both.

Credit scores and DTI ratio can be strong influences on the lender’s ultimate decision, but there is more to the formula. Lenders may consider additional factors that could boost your chances of getting your loan application approved. Here are a couple of additional things to be aware of:

  • Collateral: If you are applying for a secured loan, offer collateral of considerable value. For example, a vehicle may be more appealing as collateral than a computer.
  • Cosigner or co-borrower: You may want to consider applying with a cosigner or co-borrower to strengthen your application. If you ask someone to cosign your loan, make sure that you and the cosigner understand that you will both be responsible for the loan to some degree.

Apply only for the amount you need

Before you apply for a loan, stop and assess how much money you actually need. Keep in mind that lenders will look at what your monthly payment will be when determining whether to approve or deny your application.

Apply for the amount that is most comfortable for you, and always make sure to budget for unexpected expenses. You don’t want to end up in a situation where you have to continually borrow money or incur late fees.

Stay positive

Most of all, try to keep a positive attitude toward getting approved for the loan. If you approach the application process as an opportunity rather than a challenge, you are already off to a great start. Good luck!

Loan offers from $1,500 to $20,000

See offers, apply online and get a response in minutes

Check for offers Checking for offers won’t affect your credit score.

1 http://www.consumerfinance.gov/askcfpb/1791/what-debt-income-ratio-why-43-debt-income-ratio-important.html

*This article was updated in 2016 and 2021

This article is for general education and informational purposes, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any purpose and is not intended to be and does not constitute financial, legal, tax, or any other advice. Parties (other than sponsored partners of OneMain Financial (OMF)) referenced in the article are not sponsors of, do not endorse, and are not otherwise affiliated with OMF.

Frequently asked questions

Here are a few things that affect your eligibility

  • Financial history Credit history
  • Income and expenses
  • Loan purpose
  • Whether you have filed for bankruptcy
  • State of residence

Before you close your loan, OneMain will need the following documents from you:

  • A copy of a valid, government-issued ID (driver’s license or passport)
  • Your Social Security card
  • Proof of residence (driver’s license with current address, utility bill, or signed lease)
  • Proof of income (pay stubs or tax returns)

We may ask for more info based on your unique situation. Take the next step and start your loan application today

  • From the start of the application to receiving the funds could be as quick as one day.*
  • Completing the online loan application: Takes just minutes to complete and see your offers*
  • Signing your loan documents: After final loan approval, signing your closing documents takes about 30-45 minutes.
  • Receiving your funds: When using your debit card to receive funds, you can get your money as soon as an hour after signing the loan docs.1 Funds can also be paid out by direct deposit (ACH), which are available approximately 1-2 banking days after loan closing. A check can be issued as soon as the same day as the closing.

*Timing may vary based on: when you submit your application, how many documents are needed for approval, and how long it takes for OneMain to receive, review, and verify those documents, and whether your loan is secured by collateral, among other factors.

Are you still wondering "Is a personal loan right for me?" Don't worry – we're here to help. Just call (800) 961-5577 or find a branch near you.

If you're approved for a loan, you may see secured or unsecured next to your offer. A secured loan requires that you provide collateral, like a vehicle. An unsecured loan doesn't require any collateral from you.

Keep in mind that there are eligibility requirements such as the condition and age of your motor vehicle and proof of insurance. Also, if a borrower defaults on a secured loan, the lender has the right to take the collateral.