What are the requirements to qualify for a personal loan?

So you are in the market for a loan and are unsure of the requirements which must be met in order for the application to be successful. Let's have a look at some of the requirements you need to consider and documents you need to provide to your financial institution or lender.

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Before approaching your financial institution or lender these are some of the criteria you must meet to avoid disappointment.

Credit score

Do not apply for loans you do not qualify for. Every time you apply for credit, it gets entered into your credit report, and as such, your credit score is affected. If your application is turned down, it has a bigger effect on your credit score. This can have a negative effect on your next application for a loan.

You are entitled to one free credit check per year. Take the time to get a copy of your credit report and check to make sure there are no incorrect or false entries in the report. You can then use this information to ask the financial institution or lender what they will be assessing in the loan application before you apply.

Improve your credit rating

To improve your credit rating score, you need to ensure that you pay your bills on time. If you have any late payments or other negative information on your credit history, wait six months before applying for any credit. Make sure that during this time, you are not late on any payments. The longer you can wait, and as long as you are making regular payments, your credit score will improve, making it easier for your application to get the approval you need.

Debt to income ratio

When you apply for a loan, apply for as little money as possible to cover your needs. Keep the information you enter on your application form accurate and do not exaggerate. In some cases, the lender may overlook a lower credit score if your income is higher in relation to the amount of money you wish to borrow.

Use a reputable lender

Be smart and only deal with reputable lenders. There are many lenders online which can offer you a better rate due to lower operating costs, however, there are also a lot of scams out there. Make sure you approach a reputable lender such as a bank or, if this is not an option, ensure that the lender you approach is an accredited financial institution.

What documents do I need to apply?

Once you have decided on the lender, you will need to provide certain documentation to them in order for the application process to be as smooth as possible. Have these documents ready at the time of applying;

  • A valid barcoded identity document
  • Your most recent payslip
  • Three months bank statements stamped by the bank which reflect your salary deposits.
  • Your proof of residence not older than three months. This can be a utility bill or any statement of account which reflects your name and address.

Always make sure you can afford the loan and are taking it for the right reasons.

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