Getting loan approval successfully is no less than solving a jigsaw. Despite making confirmations about your eligibility, the outcome might be disappointing. Some lenders would like to be liberal, while some might be very strict about the loan requirements.
Even fulfilling the eligibility criteria might not be enough in many cases. This is because you might lag behind based on credit scores or affordability. Besides, depending on your financial scenario, some conditions may appear as add-ons.
For example,
You might be having a very tough time because of terrible credit scores. Now, you want to get very bad credit loans with no guarantor from a direct lender. As these loan providers come up with nominal criteria to satisfy, you might think it will be easy for you to get loans.
However, you have a troubled situation with very poor scores. When a guarantor is no longer an option for lenders to make sure about repayment, they will seek other ways to confirm. In your case, collateral might have to be provided to assure the lender about loan payments.
This factor can elevate your chances of getting loans even though your credit history is in a terrible state. Thus, you have to figure out where and how you can adjust to enhance your chances of getting loan approval.
This blog can help you with your research. Flip through it carefully for a better understanding.
Key elements that can make or break your loan eligibility
The likelihood of getting approved for a loan is quite low when you have to rely on mainstream lenders. Now, you can think of choosing loans apart from this lending source. This has amplified the odds of getting approved, unlike in the past.
Some standard conditions for lending are non-negotiable. However, you do not have to look for perfection, like perfect credit scores and low debt levels. Get to know about the aspects that can offer mileage to your loan application.
· Determine your credit history
Although direct lenders can take this factor lightly, you cannot ignore its significance. It is true that with poor credit scores, a limited number of opportunities will be accessible to you. Not many lenders will consider your candidature as suitable.
Thus, to make sure you can reach out to all lenders or just a few of them, you must review your credit report. This can be done for free, so you have no reason not to track your credit scores. Besides, when you analyse your credit report, you can keep rectifying the errors (if at all they exist).
Above all, you can take timely steps to improve your credit scores. You can do your bit to pay off the pending payments and upgrade your credit history. This can be game-changing in your case, as credit improvement is seen as a good sign by the lender.
· Current income status
Now, when you opt for a loan, you are bound to pay it back. How do you manage to repay if you do not earn money? This is where income comes into play.
The lender might have no problem in letting go of your credit history factor. However, they cannot compromise on this aspect as loan payments depend on it. With direct lenders, you get the advantage of having any source of income.
You do not have to prove that you earn from a job or direct employment. You can be a freelancer or a business owner with independent income sources. Even homemakers running different ventures with stable revenue-generation rates can get fair chances.
Thus, the most crucial factor is having a source of income. It should be such that you can manage your expenses and make room for saving to secure loan payments. Take advantage of this flexibility and establish an earning source that can ensure smooth repayment.
· Affordability has to be proved
With any type of income, the lender tries to understand your affordability. They will closely observe your financial behaviour, i.e., how you are managing your expenses with your income. A budget plan, if followed, can help you out of the way to save and spend for necessities.
This is about whether you can afford to repay the loans or not. They would like to see the extent of effort you have put into recovering from poor credit scores. Besides, the strategies you have implemented to handle usual expenses and unplanned necessities.
It would be great if you could demonstrate a financial plan that can accommodate loan payments. It can be done by showing how you can save money by adjusting a few expenses or by amplifying the income sources.
· Status of existing debts
In this regard, you must understand good and bad debts. Good debt is something that will ultimately result in a gain. For example, you get a car loan to cover some portion of the purchase price of the car.
Once you clear up the payments, you will be the owner of the car. On the flip side, there are debts like small loans that will help you to manage an urgent payment. However, you have to pay them back on time to control the increasing level of debt.
Besides, if you fail to repay on time, this situation will further invite new debts. Thus, the lender would like to validate the amount of good and debt existing in your life. If the pile of debt is low, the lender will be less worried.
Then, your money will not remain occupied, and you can easily gather funds for loan payments. One reality you must be aware of is that debts will be present. You have to make sure how you deal with them and keep them within your control.
· Choice of a sensible amount of loan
Just because they are direct lenders, you should not think that they will accept any random loan application. They carefully verify each application to see if the criteria are met or not.
Besides, they also take care of another thing, i.e., if you have selected the loan amount sensibly. Now, a loan range will be available, and you will have a free pass to choose any amount. They will analyse whether the amount matches your financial capacity.
If they find any disparity, they will not hesitate to reject your application. This is because they will not entertain any loan application that quotes an unsuitable amount. For them, what matters is that you should afford to pay the repayment amount.
A bigger amount will obviously make things difficult for you to repay. Thus, pick the loan amount sensibly.
The bottom line
The advent of direct lenders has revolutionised the lending process to a great extent. Now, if you are planning to purchase a car, options like no credit check car loans are available to you. This means that you do not have to go through an elaborate loan processing.
As a result of it, the approval process has been simplified. Thus, you just have to take care of a few factors to get a positive response from the lender. Here, they will not mind offering you loans despite poor scores if you have the deposit amount ready by your side.
Therefore, you need to understand the pointers that can work in your favour.
Anna Johnson has more than 11 years of experience in direct lending industry of the UK. She is the Senior Content Editor at 24cashflow where she is leading a large team of loan experts. During her career, she has helped the loan aspirants to use the particular loans in the best way and improve their financial lives and status.
Anna Johnson is known for her in-depth research of the UK loan marketplace, as she has worked with many major lending firms in her career. During her educational phase, she has done a research on ‘Finance Fundamentals for Growing Business’.
