Whatever big project you have, if you’ve decided to take out a personal loan to fund it, you’ll need to compile a few things to apply. While the application process may differ from one lender to the next, the criteria are similar.
You’ll be expected to share basic information to identify yourself and then vetted whether you qualify for the personal loan. This article will discuss some of the key things you’ll be expected to produce.
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What Should You Have When Applying For A Personal Loan?
Banks and lenders won’t give their money to just anyone. They need to make sure that they only lend to reliable people who will be able to pay back in time. Whatever the amount you’ll be borrowing, here are some of the requirements you’ll be expected to meet before getting the money:
1. A Good Credit Score and History
Your credit score is one of the best things to maintain if you plan ever to purchase any big-ticket items like property or cars, or qualify for, in this case, personal loans. This value evaluates your trustworthiness as well as your creditworthiness.
The perfect credit score at best ranges from a score of 300 to 850 and is determined by factors such as:
- Late payments
- Accumulated, unsettled debt
- Duration of credit record
2. Your Income
Borrowers must meet income requirements before being approved for a new loan. Lenders have different basic wage requirements, and you can check out what you’ll need at Our Money Markets. However, some lenders may choose not to share the expected minimum salary requirements.
When asked for proof of income, you can use your:
- Latest tax returns
- Your updated bank statement
- Payslip
- Authorized letter from your job
3. Debt-to-Earnings Ratio
Your DTI (debt-to-income) ratio is a calculation that denotes what percent of the borrower’s overall monthly salary is direct to cover the monthly installments for the debt you’ll incur. Lenders use this value to forecast how well you’ll be able to meet payments on any existing or new debts you might get into.
As a result, if your DTI value is below thirty-six percent, you might be denied, as you’ll be viewed as a liability.
4. Collateral
To ensure that lenders are protected when giving money to borrowers, you’ll be expected to declare some form of security regarding valuable assets, also known as collateral. In most cases, this might be related to your reasons for taking your loan; for example, in property acquisition, it might be the property you bought.
5. Identifying Documents
You’ll need to provide documentation to prove that you are who you claim to be. Some of these documents include:
- Completed Loan Application – official paper stating how much you’ll be borrowing and your details
- Government-Issued IDs -(e.g., driving license, passport, birth certificate, etc.) serve as proof of identity and help minimize the use of fake identities when applying
- Proof of Address – (e.g., recent utility bills) serves as proof of stable housing, which will be used to track you if you falter on your payments
Conclusion
Lenders often need to protect themselves and ensure that they lend money to reliable people who’ll be able to pay back. This is implemented by their strict application and vetting process, meaning that not everyone applying will qualify and be granted. However, if you can meet the requirements stated below, you’ll be closer to qualifying for the loan you need.
References:
https://www.forbes.com/advisor/personal-loans/personal-loan-requirements/
https://www.bestegg.com/resources/personal-loan-application-requirements/
https://www.sofi.com/learn/content/typical-personal-loan-requirements/
https://www.bankrate.com/loans/personal-loans/documents-required-for-personal-loan/
https://www.consumeraffairs.com/finance/personal-loan-requirements.html
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