What Sort of Qualifications Must I Meet in Order to Be Approved for a Personal Loan?
Wednesday, June 24, 2020, 6:00 AM | Leave Comment
A little extra money would be nice right now. You could use it to take care of one or more needs and make life a little easier.
A personal loan from an individual or a small group that specializes in this type of lending arrangement would do the trick.
While you understand that personal loans don’t necessarily come with all of the qualifications associated with banks and similar institutions, what will lenders expect from you?
Here are the more common qualifications for a personal loan that most lenders will require.
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Confirming Your Identity
Documentation that confirms you are who you claim to be is at the top of the list for most lenders, even those who focus mainly on granting personal loans. Some sort of official identification documents that include your photograph will work in most cases. A driver’s licence, student ID for college students, or any type of federal or provincial identification that includes all the data required by the lender will work.
The type and number of confirming documents can vary from one lender to the next. Most lenders provide simple lists of what sort of identification they will accept and how many you need. If you have both the type and the quantity required by the lender, you’re off to a good start.
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Providing a Permanent Address
The lender is also likely to require a permanent physical address for you. You will also need documents to confirm that address. Fortunately, many lenders will accept a number of documents serving this purpose.
Your driver’s license is one possibility. You could also use an invoice from one of the utility companies. If you rent and all of your utilities are included in the monthly rental rate, a letter from the property owner will often suffice. There’s also a chance that the lender would accept a copy of your motor vehicle registration if the document happens to include your current and permanent address.
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Having Eligible and Consistent Sources of Income
As with any type of loan, expect to provide proof that you have enough money coming in to make the loan payments. Most lenders set minimum requirements for monthly income. What many people don’t understand is that the income is not necessarily limited to one source.
For example, you have a part-time job that doesn’t quite generate enough money to meet the lender’s minimum income requirement. However, you do receive a monthly disbursement from a trust fund or from some sort of settlement. Many lenders would be happy to consider the cumulative income resulting from this combination. That’s because all your income sources are considered consistent.
Many lenders do provide lists of the types of income they will accept. Review the list and see how that compares to your income sources.
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Demonstrating the Ability to Repay the Loan on Time
It’s no surprise that lenders want to have some assurance that you will make your loan payments on time. The fact that you’re up to date on any current obligations helps. If you have few if any types of unsecured debt, that further indicates that you have enough money after covering the basics that can be devoted to repaying the loan. It will be up to you to demonstrate that along with generating enough income you are also the type who likes to pay the bills on time every month.
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Acceptable Collateral If the Loan is Secured
While many personal loans are unsecured, it is possible to obtain a secured loan. That means you will need to have collateral to pledge for the duration of the loan term. Find out what sort of assets the lender typically accepts as collateral before you spend a lot of time on preparing an application.
Many lenders will accept vehicles that the applicant owns outright. Some will accept jewelry that’s been certified as having a certain level of market value. Stock certificates are also a possibility. Even artwork that’s appraised at a certain value may be acceptable.
The benefit of a secured personal loan is that providing collateral helps to reduce the degree of risk that the lender assumes by doing business with you. That in turn could lead to a loan offer with a lower rate of interest.
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Will My Credit Score Matter?
One way that personal loans differ from other lending arrangements is that your credit reports and scores generally carry less weight. That doesn’t mean a lender may not pull one or both reports and take a look at them. What it does mean is that the lender will likely be more interested in the recent information submitted by present creditors and less in what happened two or three years ago.
Even among personal loan lenders who do place more emphasis on credit scores, the circumstances behind those scores might receive more attention. For example, if your score dropped a few years ago because you applied for and received one of the consumer proposal loans currently on the market, the lender will likely look on that with more favour than seeing a number of delinquent debts. That’s especially true if you paid that consumer proposal loan in full over a year ago.
You can tell if a personal loan lender is all that interested in your credit score by checking the loan qualifications. If you see that the lender only deals with applicants who have over a certain credit score, assume that your reports will matter a little more.
Personal loans can often work well when applying for other types of loans is out of the question. Before spending time on an application, review the requirements that the lender has in place. If you don’t qualify with one lender, there’s a good chance that a different one will be happy to review your application.
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