How do you know if you’ll be eligible for a loan? Find out more about how to judge your own eligibility before you apply for a loan.
Getting rejected when you apply for a loan not only has an effect on your future plans, it can also negatively impact your credit score, as well as being a stressful experience. The success of your application depends on several factors, such as your credit score, how much you want to borrow and how much you can afford to repay per month, all of which impact your eligibility.
Would I get accepted for a loan?
Your chances of successfully applying for a loan depend on your current financial situation. Lenders will take your credit score into account and from that, decide whether or not to approve a loan. There are a wide range of loans on the market, available to suit a wide range of circumstances. Not everyone will be eligible for every loan, but finding the right one for you can go a long way to making sure you are.
Brokers can be a good option for finding a loan you may be accepted for. They can improve your chances of a successful application by acting on your behalf and accessing a wide catalogue of lenders that aren’t always available to those who apply themselves, as well as taking into account your personal circumstances while they’re searching for the best products.
Of course, this doesn’t automatically guarantee success. Sometimes, lenders can deem a borrower too risky based on previous borrowing behaviour or outstanding debts. That said, unsuccessful applications aren’t always down to these factors, but instead stem from applying for the wrong loan product or asking to borrow more than your financial history suggests you can afford.
When applying for a loan, it’s important to consider which loan best fits your needs and whether you can comfortably afford payments. It’s also worth talking with an advisor, who’ll be able to point you in the right direction when it comes to deciding which loan is right for you.
How do I know if I am eligible for a loan?
You won’t truly know your eligibility for a loan until application, as it’s only once the lender has all the required information that they’ll be able to make a decision on your financial situation. It’s worth considering however, that any unsuccessful application can negatively affect your credit score, which could make it more difficult to borrow in the short-term.
With that in mind, it’s best to do as much research as you can before making a loan application to gauge your own eligibility. Many lenders also allow you to complete a pre-application process, which means they do a soft credit check. While this doesn’t guarantee approval, it will indicate whether you are likely to be approved or not, giving you the chance to make a decision over whether to apply or not.
What to do if your application for a loan is unsuccessful
When it comes to borrowing, the reality is that you may not be successful. If you are unsuccessful in your application, it’s important not to apply elsewhere immediately. A few applications (and refusals) in a short period may negatively affect your credit score, making it even harder to borrow in the future.
If your financial situation allows for it, it can be a good idea to spend a few months improving your overall credit score before considering reapplying for your loan.
If you are struggling financially, perhaps talk to an advisor, who will be best placed to help you with your current situation.
How to improve my loan eligibility
There are several ways you can increase your chances for a successful loan application, most of which centre around improving your credit score:
Register to vote
Registering on the electoral roll gives lenders an official proof of address, as well as confirming your identity.
Pay down existing debts
Try and pay down existing debts if you can. Clearing outstanding phone bills, utilities and credit card balances can help improve your overall credit score and shows lenders that you are willing and able to repay debts. Try taking a few months to reduce your current debts and continue paying your bills on time to improve your overall report.
Reduce your borrowing expectations
It may not always be possible to secure the amount you need due to your current financial situation. Consider if it’s feasible to apply for a lower amount and budget accordingly to achieve your financial goals. By applying to borrow a lower amount, you may have a higher chance of being approved.
Use a loan broker
Loan brokers have access to hundreds of potential lenders and as such can search wider to find you the best products and offers for your financial situation.
Your eligibility for a loan depends a lot on your current financial situation. Though there are many factors that will determine the success of your application, it’s possible to improve your chances by following a few simple steps.
Find out more about your eligibility and our range of business and personal loans here.