Applying for a loan can sometimes be a long journey, but knowing what you need to prepare ahead of time can help speed up the loan approval process. Get started with these simple tips.
1. Organise your paperwork
Before starting the application process, make sure you have all of the documentation you'll need ready to go. Different lenders may have different documentation requirements, so contact your lender ahead of time and get a checklist of the items they need to process your application.
These usually include your proof of income, bank statements showing proof of savings, and bills addressed to your residence or rental agreements that could form part of the proof of address documentation.
2. Be real with yourself about your ability to service the loan
A serviceability assessment is one of the key stages in the loan-application process. Lenders will assess you on your ability to service a loan based on your income, expenses and other factors such as any outstanding debts.
It is important to understand your ability to repay the personal loan you plan to take out. Think about things like whether your income could change in the near future as a result of switching jobs, for example, or if you expect your expenses to increase significantly for some reason.
Being realistic with yourself about what you are able to afford can prevent you from getting in trouble down the track and even defaulting on your loan payments, which can adversely affect your credit score and make any future borrowing difficult. How your credit score is calculated depends on a range of factors but remember that if you find yourself with an impaired credit score, don't despair. Understand why and rebuild your credit rating over time.
3. Think about your budget and any other debts
Including any credit cards, what other financial obligations do you have currently? Having too much debt can prevent lenders from approving your personal loan application, and as we've already identified, it's definitely not a good idea to borrow more than you're able to comfortably pay off.
If you do have a significant amount of existing debts, consider cutting down on your credit card debts first or possibly look at consolidating all of your debts into one manageable loan. A licensed financial advisor can also help you work out whether taking on a personal loan is actually the best next step for you and understand the pros and cons of consolidating your debts.
4. Get an updated credit report - and check it
Have you looked at your credit report? Your credit report contains information on any loan enquiries you’ve made in the past, your credit providers, any serious debts, credit infringements, defaults on payments and bankruptcy. Based on your credit history, you are given a credit score that lenders use to assess your personal loan application.
It’s a good idea to get a copy of your credit report – before applying – from a licensed credit reporting agency like Equifax. You can make sure that any outdated information gets corrected (if you’ve recently paid off some debt but it’s not reflected in your credit report, for example) so that your credit score is in the best shape possible for assessment with your personal loan application.
5. Only apply for what you need
Be honest in your application - that includes explaining why you need the specific amount of money you're applying for. A good way to maximise your chances of approval is to demonstrate that you're borrowing what you need.
At Pepper Money, we understand that one person’s borrowing circumstances can be very different from the next. That’s why we take each customer’s individual situation into account when we assess their application.