Personal loans are useful for helping you remodel your home or pay for a medical expense, wedding or something of the like. They can also be used to fund a business.
It’s perfectly advantageous to fund your business using a personal loan. However, business loans alleviate any personal liability and make it easy to build a financial reputation for your company. But, they are usually difficult to attain if you don’t have a good stronghold in the market.
Many financial institutions allow up to $50,000 for a personal loan, depending on what you’re trying to get the loan for. Of course, you still run the risk of having your personal loan turned down. In fact, according to the latest information, 76 percent of people who apply for a personal loan are turned down.
Why is that?
Poor Credit Score
One of the biggest reasons a person is turned down for a personal loan is their credit score. If your credit score is poor or you don’t have a good credit history, lenders are less likely to take a chance on you. If they do approve, you may not get the best terms.
Most lenders want a credit score of 700 or higher. When approved for a loan, repaying it over time on time increases your credit score. It’s possible to attain a secured loan with bad credit, as they take into consideration your present state instead of your previous history.
Another reason lenders are hesitant to giving out personal loans to people is the lack of sufficient income to repay the loan. Lenders want bank statement and wage slips to find out how much your monthly income is. They have a minimum income threshold they abide by. They will look at your income and compare it to your expenses to determine if you can feasibly repay your loan.
If you have existing debt, they will take a look at this as well. If you have a lot of debt, they weigh that against the monthly income. If you’ve been applying for credit in different places at one time, they may reject the application.
The lender will also be interested in the reason you need a personal loan. They want to see that the money is being used for a good reason such as home improvement, debt consolidation, etc. They may give you restrictions on how you can use the money too. For instance, you can’t use it to gamble the money or to put it down towards the down payment of another loan. Many lenders are also discouraging people to using the money in cryptocurrencies.
You should be as truthful as you can about why you need the money. If the money will be used for a business, be sure to give them a business plan. Lying about the reason for the loan is committing fraud.
Carefully Look At The Loan Terms Before Choosing A Lender
Making good financial decisions is imperative. Look at your own financial situation and make sure that you really need the money and that you can afford to make the payments on it if you do. You can also use crowdfunding methods to raise the cash you need.