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Whether you need cash for home improvements, medical bills, or another personal expense, a personal loan could be a helpful option. To qualify for a personal loan, you’ll typically need good to excellent credit, verifiable income, and a low debt-to-income (DTI) ratio.
Cleaning up your credit and paying down any outstanding debt you have could help your personal loan application get approved.
If you’re ready to take out a personal loan, here are four tips for how to improve your personal loan application:
- Check your credit report
- Don’t apply for the largest loan amount you can get
- Consider applying with a cosigner
- Find the right loan lender
1. Check your credit report
Your credit score is one of the biggest factors that lenders consider when deciding whether to approve you for a personal loan. You’ll generally need good to excellent credit to qualify — a good credit score is usually considered to be 700 or higher.
Because of this, it’s a good idea to check your credit report before applying to see what shape your credit is in. You can use a site like AnnualCreditReport.com to review your credit reports for free. If you find any errors, be sure to dispute them with the appropriate credit bureau online, in writing, or by phone to potentially boost your credit score.
Learn More: How to Build Credit Fast and Effectively
2. Don’t apply for the largest loan amount you can get
When you apply for a personal loan, the lender will measure the risk of lending to you. This includes looking at whether you’re reasonably able to afford an additional monthly payment on top of your current obligations.
If you try to borrow a large amount of money that would stretch your budget too thin, lenders might see you as too much of a risk — which means they likely won’t approve your application.
Before you apply for a personal loan, be sure to consider how much you can afford to pay toward the loan each month. This can help you figure out a loan amount that will fit comfortably in your budget — which will likely make it easier to get approved.
You can use our personal loan calculator below to estimate your monthly payments and overall loan cost with different loan amounts.
Enter your loan information to calculate how much you could pay
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3. Consider applying with a cosigner
If you have less-than-perfect credit, applying with a creditworthy cosigner could help you get approved for a personal loan. Not all lenders allow cosigners on personal loans, but some do.
A cosigner can be anyone with good credit — such as a parent, another relative, or a trusted friend — who is willing to share responsibility for the loan. But before someone cosigns a loan for you, it’s important that both of you understand the risks involved, such as:
- Payment liability: If you don’t make your loan payments, your cosigner will be on the hook.
- Credit damage: Missing payments on your loan will cause damage to your credit as well as your cosigner’s.
- Strained relationships: If you aren’t able to manage the payments on your loan and hurt your cosigner’s credit, you could end up straining your relationship with your cosigner.
Check Out: How to Get a Personal Loan
4. Find the right loan lender
There are a wide variety of lenders that offer personal loans, including online lenders as well as traditional banks and credit unions.
Before you apply, it’s important to shop around and compare your options from as many personal loan lenders as possible. This way, you’ll have an easier time finding an optimal loan for your situation along with a favorable interest rate.
If you’re ready to start looking for a personal loan, Credible can help: You can compare your prequalified rates from multiple lenders in two minutes. Note that this requires only a soft credit pull that won’t affect your credit.