When you need funding and choose to use an online lender, there are typically a range of factors that they will consider when reviewing your loan application. If you think it all revolves around your credit score and perceived creditworthiness, you might be surprised to learn that that’s only the start. Let’s take a look at some of the most significant or common factors that lenders take into account when looking at applications.
What Online Lenders Look For In Your Loan Application
Employment and Income
Stable employment, and a consistent, reliable income are essential aspects of loan approval, and they are something every lender will look at. Your income determines your ability to repay, and stability reduces the risk of default. Lenders will generally request pay stubs, tax returns, and bank statements to back up the information you tell them.
Debt-to-Income Ratio
Your debt-to-income (DTI) ratio is another factor that online lenders will consider with your application. Your DTI is a comparison of your monthly debt payments to your gross income. A lower DTI ratio indicates that you have more manageable debt. The DTI that each lender prefers is unique, though they are often around 40%.
Loan Purpose
Many lenders will take the loan purpose into account since this can have an impact on the risk level of the loan. Loan purposes like debt consolidation and home improvement are generally seen as low risk, while purposes like vacations are seen as higher risk. Stating the loan purpose and providing documentation can help show your preparedness to take out the loan.
Collateral
If the online lender requires collateral to secure the loan and minimize their risk, it will need to assess the collateral. Collateral can be assets like your home, vehicle, boat, or other valuables. If you default on the loan agreement, the lender has the right to take possession of the collateral to recuperate their losses from the defaulted loan. Providing collateral when it’s not required can improve your odds of approval.
Repayment History
Another major factor is your payment history for other loans and lines of credit that you’ve been extended. They want to know if you’ve made payments to other loans and credit products on time, and adhered to the terms of other financial obligations. This can help demonstrate that you’re responsible and able to pay your debts on time.
Application Accuracy
Finally, lenders will review the accuracy and completeness of the application itself. Make sure that everything is filled out, accurate, and up-to-date. Inaccurate applications can create significant delays, while incomplete applications will often simply result in a denial.
Make Your Loan Application More Effective By Knowing What Lenders Look For
Understanding what an online lender is going to look for when reviewing a loan can help you make your loan application much more effective, and boost your chances of approval. Focusing on improving your credit score, maintaining a solid employment history, and keeping overall debt levels low can make you a far more attractive and potentially low-risk borrower. If you’re thinking about making a personal loan application, reach out to Cash Link USA today to get started.
