Qualifying for a loan without putting down security is not a cinch. You need an impressive credit score and strong income sources. Well, this is just a benchmark used to determine your eligibility. It does not guarantee that you will get the nod for a loan from your direct lender.
Requirements vary by lender. Some lenders emphasize your leftover income while others emphasize your cash flow, but all these lenders have one thing in common – they want their money back on time.
Ways to improve approval chances of a personal loan
Here are some useful tips to improve your chances of personal loan approval:
- Push your credit score up
Your credit rating will reflect on your lender’s lending decision. Interest rates and repayment terms will be decided based on how good your credit file is. The health of your credit score is not subject to timely payments. Other factors like how much debt you owe, how much limit you have utilized of your credit card, and the number of inquiries for a loan are also part of the picture.
- Review your credit report for erroneous information. You may be the victim of identity theft. Make sure your credit file does not show any account that you did not open.
- Despite a good payment history, you can be turned down for an unsecured loan if you already owe too much. Keep yourself free from the obligations at the time of applying for these loans.
- Pay off your credit card balances before your lender reports them to credit reference agencies. Having a low credit utilization ratio will work in your favour.
It can take a bit of time to do up your credit score, so the sooner you jump into action, the better.
- Do not borrow too much
A lender will determine your affordability in relation to other obligations like rent, utility bills and other debts. A personal loan can be a heavy burden for you when you have other debts to pay off. You should use an online loan calculator to estimate how much a particular sum of money will cost you every month.
Bear in mind that interest rates for personal loans for bad credit on guaranteed approval will be high, so the cost will be even higher. Borrowing a smaller sum lets your lender trust your repaying capacity. As a result, the chances of approval will be slightly up.
- Arrange a guarantor
You may have to jump through hoops if your credit score is not up to snuff. A poor credit rating insinuates that you do not keep up with payments. Your lender will be sceptical about your repaying capacity. They may even turn you down straight away.
Fortunately, you have a chance to persuade them to reconsider by arranging a guarantor who can be anyone, either your family member or friend. The involvement of a guarantor lets up the risk of your lender, as they can call upon them to repay your debt when you make a default.
It is not easy to arrange a guarantor as your missed payments will also be recorded on their credit report and affect their credit score, which makes it complicated for them to borrow money at lower interest rates down the line.
- Find the right lender
Your job will be much easier if you already know the bare minimum credit score that a lender accepts, the interest rates they offer and whether they need a guarantor. Applying to the right lender lowers your chances of rejection and the risk of multiple inquiries. You will need to spend time finding a lender that matches your credit profile.
It can be challenging and time-consuming as well. If you are unable to do it, take the help of a broker for a personal loan. They will assess your credit rating and financial condition before finding a lender willing to accept your application. You need not be afraid of losing your credit points as brokers run soft inquiries to know your credit points.
- Prequalify for a loan
Hard credit inquiries will pull your credit points, and therefore, you are suggested avoiding too many applications in a short period, but what if you are turned down by your lender every time? Here comes the role of prequalifying.
It allows you to obtain a prequalifying letter from multiple lenders to get an idea of how much interest rates and fees they will charge. A prequalifying letter cannot disclose the actual rates you will be charged because the quote is made without a credit check. You can choose the most affordable deal by having prequalified letters from different lenders.
- Increase your income
The size of your income should be relatively higher than the size of your debt. Otherwise, you cannot ever settle your debt obligations. Convincing your boss to give you a pay hike is not feasible unless you have bent your back to do your job. Therefore, grab a side gig.
A second job will help you earn some cash. Your lender will become more confident about your repaying capacity when you have multiple income sources. Side gigs often involve flexible working hours, so you can easily manage both types of jobs together.
The final thought
A good credit report and strong income can help you qualify for a personal loan at affordable interest rates, but these two factors do not only assess your affordability. The minimum credit rating that a lender accepts also plays an important role. Despite your good payment history, you may have a higher debt-to-income and credit utilization ratio. The size of your outstanding accounts can influence the decision of your lender.
Comparison-shop to pick lower interest rates and fees. Get prequalifying letters to reduce your chances of rejection. Take the help of a broker if you find it discombobulating and time-consuming.
The reason for borrowing money is also important. You cannot use unsecured loans for business, so make sure your application is not turned down because of the reason for borrowing.

For over 5 years, Alex Thomas has been working as a noteworthy content writer at Zeolitefunds. After graduating in Economics, he started working in the finance sector. His interest in loans has encouraged him to explore extensively. His write-ups in the form of blogs and articles have shown his exceptional knowledge. Alex’s work is a product of his hard-core research and writing expertise.