A personal loan can give you an immediate cash boost in a time of need. While loan requirements may vary from one lender to the other, each financial institution looks at a few things before considering the loan application. You can choose traditional lenders like credit unions and banks or online lenders like Wallet Wizard for the required loan amount.
So, before you start your inquiry, it is better to familiarise yourself with the criteria you must fulfill. The knowledge will enable you to navigate the borrowing process and improve the chance of qualification.
The requirements for loan application and the documents that you must have at your disposal are mentioned below:
Loan requirements
Credit score
Any lender will look at the first factor when evaluating your loan application is your credit score. The score depends on factors like outstanding debt amount, payment history, length of credit history, and the type of credit used.
When you have a credit score above 600, you can get the best loans with competitive interest rates. You may also find lenders that provide a loan with a bad or no credit history.
Income
You must fulfill some income requirements before you take out a loan. For a specific lender, you need a minimum annual salary of $45,000; for another, an income of $20,000 will suffice. It would be best to remember that many lenders don’t disclose the minimum amount.
You may also need to provide evidence of your income, including bank statements, tax returns, or deposits.
Debt-to-income ratio (DTR)
DTI is the percentage of one’s income that goes into monthly debt service. Lenders assess this ratio to predict your ability to make current and new debt payments. Ideally, lenders approve loans to individuals with less than 36 percent DTI. A DTI of 50 percent is also considered in some exceptional cases.
Collateral
It would help if you pledged collateral to secure a personal loan. It may include a vehicle, house, car, or cash. If you can’t repay the loan, the collateral can be repossessed to recoup the balance.
Origination fee
Some lenders ask for an origination fee to cover the costs incurred during application processing, running credit checks, and closing. The price may range between 1 and 8 percent of the loan amount.
Loan documents
Loan application
Be it a bank or an online lender like Wallet Wizard, providing a loan application is the first step of the lending process. The application must include basic information like the amount you need to borrow and the purpose of the loan.
Some online lenders providing online applications simplify the process, while others may discuss the application over a call before deciding.
Identity proof
The acceptable forms of identification include:
- State-issued ID
- Passport
- Driver’s license
- Citizenship certificate
- Birth Certificate
Income verification
The lender may want to verify your current earnings and employment history to ensure you can repay your debts and the loan amount. Some common forms to verify income include:
- Returns
- Paystubs
- Bank statements
- Contact information
Address proof
Apart from confirming the employment, the lender would look into your living situation and check if it’s stable. The address proof may include a rental agreement, utility bills, voter ID, or rental insurance that mentions your address.
You can get personal loans from any source of your choice. But you must research to find the most competitive interest rates and loan terms that fit your needs. Also, you can contact customer support and make an informed decision if you have any queries.
