How to Get a Personal Loan Approved

Joseph Meyer
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If you’re applying for a personal loan for the first time, the process may seem hectic and stressful. With so many lenders offering loans, it can be tough to figure out which company to go with.

However, with Online Loans Direct you’ll find the process easier thanks to our detailed loan applications. We will guide you through our application and help you answer many of the questions that you may not know the answer to.

We’ll also provide you with an instant loan eligibility checker that will tell you how fast you could receive your loan if you are approved.


Fast, & Fault-Tolerant Qualification.

You’re in college/university, you need to go for campus recruitment or foreign recruitment, but you don’t have the money to pay for it. Or, you need to have a cool vacation with your friends and family and you’re the only one in the group who can afford it, or if going to college next year, you need to buy books.

You need to get a personal loan from a bank, and that’s where the problem starts.

First, the bank asks you to show your income and expenses statements, and almost all of your financial documents (to prove that you’re not a crook, and if you don’t have the documents, it can take several weeks to go through all the papers).

Then, even with your documents, you might need to supply your guarantor … and they ask for your guarantor’s documents too. And then you’re rejected, “because you didn’t send the documents.”

Guide to Lenders

There are plenty of lenders out there who will be willing to lend you money. But who are these lenders? The best lenders are those who give you money based on your credit score … but they are not the only lenders.

If you have a bad credit record, you may have to resort to alternate lenders… which could mean you have to pay higher interest rates or have fewer options regarding the amount that the lender is willing to loan you.

To help you chose a lender and get the money you need fast, take a look at the following tips.

Check out your credit report and score. Before you apply for your loan, you need to know your credit score. This will help you decide which lenders you should apply to and will assist you with setting the maximum amount you should ask for.

Consider asking for multiple loans. If your credit score is less than perfect, you may actually be able to get an increased loan with the right lender. However, when you apply for a second loan, you will have to consider your overall debt. Prior to applying, you can check out the government’s site for ways to plan for getting your debt balanced out.

Qualifying Through Your Bank Or Credit Union

For most borrowers, the best place to start is your bank or credit union.

In general, smaller banks and credit unions have fewer underwriting restrictions and can approve you without too much hassle.

That said, even if you are declined by a smaller bank or credit union, you may still have options. Many banks and credit unions will still consider putting you on a joint account with another borrower as a viable option. So a family member, friend, or other close associate may be able to co-sign in some cases.

Unsecured Personal Loans

Here are the main benefits of choosing unsecured personal loans:

  • More flexible terms – including repayment amount, period
  • No security (your house or other property) needed
  • More flexible payment options

Secured Bank Loans

If you have a security or object that you could use for collateral, you may qualify for a secured bank loan. It’s almost like a loan program where the bank lends you the money and you have to pay it back with interest.

You use your home, car title, or other valuable possessions as security (collateral) for your loan.

Secured loans do not require good credit and generally have lower interest rates than unsecured loans. Banks are more likely to approve you for a loan if you have something valuable available for collateral.

Most of the time, secured loans are offered at better interest rates than similar loans offered by credit unions and non-bank lending institutions.

To get a personal loan, you will need to have a high income and at least middle credit score. Such loans are quick and usually require little to no paperwork. Because most of the money will be used to provide temporary emergency funds, it’s rather common for secured loans to come with a higher interest rate.

Other Options For Personal Loans

If the banks deny you, there are still other options to get your loan, or the lender may require additional information, such as:

  • proof of income “ utilities, paycheck stubs, 1099s and tax forms;
  • credit reports “ a full credit report with the three major credit rating agencies to show payment history;
  • bank statements “ to show your available savings for setting up a payment plan; or
  • budgets “ to show an estimation of monthly expenses.

Peer to Peer (P2P) Lending

P2P lending, also known as social lending, person-to-person lending, or crowdlending, is the practice of lending money to individuals or businesses through online services that match lenders directly with borrowers.

Lending money through peer-to-peer lending sites is a great way to earn a decent return on your money. For example, the rates available at the well-known peer-to-peer lender, Lending Club, are often between 5% and 14%, which is significantly higher than you’d earn with a traditional savings account at a bank.

And the process is very simple. If you’re interested in becoming a peer-to-peer lender yourself, you can simply open an account on a peer-to-peer lending site like Lending Club and start the approval process by verifying your income and identity.

Once you’re approved, you start browsing through a variety of loan offers of different terms and interest rates. Once you’ve selected an individual loan to invest in, the website takes care of paperwork and administration, so you can rest assured that all your money is going to be invested in legitimate loans.

And if you want to get started, here’s a detailed guide that covers the entire peer-to-peer lending process in detail.

Unsecured Personal Loans

Here are the main benefits of choosing unsecured personal loans:

  • More flexible terms – including repayment amount, period
  • No security (your house or other property) needed
  • More flexible payment options

Credit Cards

If you don’t have a credit card or a poor credit history, you will sound like a risky borrower to a bank. And even if you do have a credit card, a poor or non-existent credit history will make it really hard to get approved for many low interest personal loans in Singapore.

Having no credit history or an extremely limited credit history will make it hard for you to get a personal loan on your own. That’s because most banks tend to rely on your payment history (which reflects your credit score) to screen loan applicants. If you have no credit history, it’s impossible for banks to determine your creditworthiness. As a result, getting a personal loan without a credit history is more difficult.

Luckily, an increasing number of banks are beginning to recognize that some individuals are, in fact, better off if they maintain no credit history because they are generally low risk borrowers regardless.

This is why some banks include individuals with no credit history in their new credit assessment components. However, the bank is likely to require you to have adequate savings and adequate annual income before they approve a personal loan.

Family and Friends

It’s not always easy to get an approval for a loan from a bank these days. Even if you get a loan approved, the interest rates may not be the lowest around. If you need some quick cash to help you get approved before your personal loan goes through, you can always approach family members. Make sure you’re just borrowing for a short time. You can even start by asking them to co-sign on a loan, and it may not even need to be paid back. This is also a good way for you to build credit. One caveat with this method is that if the family members who co-signed on the loan defaulted, they would be responsible for the loan’s repayment.

Before Getting A Personal Loan: What To Know

Loan Amount

Most personal loans feature a fixed interest rate and fixed monthly payment duration. The amount you receive will depend on several factors, including your income and employment history. However, the higher your income, the greater amount of money you’ll be able to borrow. This makes sense because the more money you earn, the less risk you pose to the lender.

If your credit score is low, you can expect to have your loan amount reduced. This could be a deal breaker for some borrowers if they need the full loan amount to make their purchase.

Secured vs Unsecured Personal Loans

Secured and unsecured personal loans offer the borrower different benefits. An unsecured personal loan allows a borrower to use any home as collateral, even if the home has very little equity available. If the borrower does not make all of the payments, however, the lender can decide to foreclose or repossess their home.

Secured loans, on the other hand, give a borrower the option to use the cash to purchase assets that they can secure (usually with collateral). If the borrower does not make the payments, the lender has the full right to claim the assets or sell them at a public auction in order to recoup their money.

If you are seeking a loan for personal reasons but have a low credit score, you could reap the benefits of an unsecured loan. It is easier to secure a loan with a low credit score than a high credit score so this is a valuable benefit. And unlike most loan types, you are free to use the funds as you like.

If you are after a loan for business, however, you are likely to be better off with a secured loan. A secured loan stands out as the most popular type of loan for any entrepreneur. It is also one of the most affordable loans to have, making it the most popular loan for small business even though there are risks involved with this type of loan.

Personal Loan Requirements

Before you go out and apply for a personal loan, you need to fulfill certain requirements set by banks, local financial institutions, or even the lender themselves.

To be able to secure a good rate, you need to have a high enough annual income.

You then have to decide if you want a secured personal loan, which will oblige you to put up your assets, such as a home, a vehicle or a business as security, or an unsecured personal loan, in which case you will not have to put up anything, except a co-signer for your application.

Besides financial eligibility, you have to be vouched for by a good number of individuals. This is known as a guarantor.

Sometimes, this involves a stipulation, too. One of the options is that you are taken at your word by the lender. This means that if you say you can afford to pay back the loan, and you have a job that supports this claim, it will be your word against theirs. Another condition is that you have to have a good credit rating.

However, if you do not have any of the above, you should contact your bank for the requirements.

The Terms

Before applying for a personal loan, you need to understand the terms you’ll see on the lender’s website. These common terms will help you decide which lender is best for your situation.

Loan Purpose

The most obvious term. Basically, the loan purpose dictates which loan you should be applying for. If you’re taking a personal loan to pay off your credit card balances, you know you’re going to use capital.

If you’re looking for a loan to pay for school tuition, a personal loan is the one for you.

If you’re looking for alternatives to a payday loan, one of your best options is a personal loan or line of credit (LOC). Personal loans are designed for monthly payments, while a line of credit is designed for revolving expenses.

Yes, you can use a line of credit for requirements such as home repairs, but you’ll likely need a combination of credit and cash for those larger expenses.

Mortgage lenders often prefer a cash down payment, since you may be committing a significant chunk of your available cash to a loan. But, a LOC instead of a cash down payment may be worth the risk if you need the money once a month rather than once a year.

Final Thoughts On Personal Loans

Did you know that personal loan interest rates depend on your credit history? This means that if you’re a new borrower with a spotty credit history, you’re probably going to be paying higher interest rates than people who have established credit histories.

On the flip side, if you do have an established credit history, you will be paying lower interest rates. But keep this in mind: just because your credit score is good doesn’t always mean you’re guaranteed to get approved for the lowest interest rate. Whether you’re getting approved depends largely on how much you owe compared to your credit limit and how much debt you have compared to your income.

If you’re a new borrower, your best bet is to apply for a low interest credit card instead of a personal loan for now. Since your credit history is limited, you’re likely to be turned down for a personal loan. But the good news is that if you limit your credit usage to a low interest credit card, you can start establishing a better credit history.

In the meantime, if you need a little extra cash to keep you going, check out some of our other articles on how to make extra money.