Unlike a home loan or car loan where the money you borrow is tied to a specific purchase, a personal loan allows you to use the money you borrow however you want. Whether you want to pay off old debt, take a much-needed vacation, cover unforeseen medical expenses or just about anything else you can think of, a personal loan could be the ideal solution.
Although these loans offer a great deal of flexibility, that flexibility comes at a price. Since personal loans are not secured by property, they tend to carry higher interest rates than other types of loans. Additionally, they typically are more difficult to qualify for than secured loans. Fortunately, however, there are ways you can make yourself more attractive to lenders. Check out the following tips to improve your chances of qualifying for an unsecured personal loan.
Clean Up Your Credit
Before you apply for a loan, check your credit report. Look for any incorrect information that could be damaging your credit score. Contact the credit bureaus to dispute any inaccurate items before applying for a loan. By doing so, you can raise your credit score, which in turn can help improve your chances of qualifying.
Get Your Personal Records in Order
Gather together copies of your most recent pay stubs, last year’s tax return and any other documentation that can prove that you are a good credit risk. Take this information with you when you go to apply for your loan.
Pay Down Your Existing Debt
If your existing credit cards are maxed out, consider paying them down as much as possible. By reducing your overall credit usage, you can improve your credit score.
Gathering the necessary documentation and cleaning up your credit report before contacting a lender is the best way to increase your chances of qualifying for a personal loan.