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Tips to Improve Your Chances of Loan Approval
●February 25, 2021●4 minute read
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Being approved for a loan can be a difficult task if you don’t know what you’re doing. If it’s your first time applying for a loan, or you just want to be safe, here is how to improve your chances of being approved for a loan.
Know your credit score
If you have struggled with debt in the past, this will be reflected in your credit score. On the other hand, if you have managed debt well in the past, without needing to default or delay any payments, this will reflect positively in your credit. Knowing your credit score lets you know what options you have in terms of loan terms and lenders. For example, if you have bad credit, you may find it difficult to be approved for a loan through a traditional lender like a bank or credit union. You may need to seek financial aid from an online lender, like Jacaranda Finance, for the best chances of approval.
Checking your credit score is also beneficial to ensure that there are no errors or discrepancies on your credit report. If you find any errors, you should contact the credit bureau where the error was recorded and have this amended immediately. You can access a free copy of your credit report annually from any credit reporting agency, such as Equifax and Experian.
Settle any existing debts
Having existing debt does not reflect well in the eyes of lenders. When applying for a loan, it is important to show lenders that you have the ability to repay your loan. If you have multiple existing debts, this makes you look more ‘risky’ to lenders, as the chances of you struggling to manage another debt are increased.
Try to settle any credit card debt or other debt that you may have incurred before you apply for another loan. Paying down debt will make your application much more favourable.
Know the lending criteria
It’s important to familiarise yourself with the lenders’ eligibility criteria. Most lenders will have a set of standard requirements all of their applicants must meet before they can approve their application. If you know you do not meet any of these criteria, you will not be approved for your loan. At Jacaranda Finance, our lending criteria is simple. Most lenders will have similar criteria, however, it is important to check to make sure.
- Be at least 18 years old
- Hold Australian citizenship or an Australian permanent residency
- Have a consistent income into your bank account for the last 90 days
- Have an email address and mobile number
- Have internet banking set up
Apply for the right amount
Smaller loans are generally easier to be approved for because there is less risk involved for the lender. Consider what the loan is going to be used for. Is it for dental expenses? Is it for a car loan? If your loan is for dental expenses that will cost you $500, applying for $1,000 will likely be declined because you have tried to borrow an excess of $500. You will need to have your reason for your loan ready when you apply.
Demonstrate a good savings record
If you can contribute regularly to your savings account, you will demonstrate that you are financially responsible. If you make regular deposits weekly or even monthly, you demonstrate that you will likely be able to manage your regular loan repayments.
If you are applying for a larger loan amount, having a good savings record can also help if you choose to put down a deposit or make a balloon payment/lump sum payment at the end. If you make a large deposit, say for a car loan, you will have less money you need to borrow. This could mean less interest and monthly fees over time. A balloon payment/lump sum is a payment made at the end of your loan to settle the existing amount. This can be organised with your lender, but you should do your research to ensure that this will end up being more favourable to you.
Maintain a consistent income
If you are considering changing jobs or going back to university to continue your studies, you may wish to reconsider applying for a loan. Lenders look for consistency in your income. This is because they want to see an income from a reliable source, like a stable job, before they approve you for a loan amount.
Choose the right lender
Different types of lenders cater to different borrowers. Traditional lenders like banks and credit unions typically cater to the most ‘high-end’ borrowers that have the highest credit scores. However, there is a range of online lenders that can cater to bad credit, such as Jacaranda Finance, that focus on other factors.
Jacaranda Finance offers personal loans from $1,000 to $15,000 with flexible repayment terms. We use highly efficient technology to look at your bank statements to assess your current relationship with money. While we must conduct credit checks on all of our applications, a bad credit score will not stop you from accessing finance form Jacaranda.
We also offer car loans from $5,000 to $35,000 for both new and used cars. Our repayment terms are flexible, from 1 to 4 years, so you can repay your loan comfortably.
Whether you are looking for a car loan or a personal loan, we will have an option to suit you.
For more tips for approval on your first car loan application, read our latest blog. Before you apply for a personal loan, here are our 5 things to consider when getting a personal loan.
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Written by Jacaranda Team