Although, indeed, a key point that financial institutions take into account when evaluating a person’s payment behavior is if their credit history has negative reports, it is not the only factor they analyze to approve or reject their application. There are other reasons that the institutions investigate to get loan approval.
Keep in mind that the decision to grant a loan corresponds entirely to the entity from which you requested it. Under its parameters and internal credit placement policies, it is free to approve or reject them.
That is why the best thing you can always do to obtain loan approval is to comply with all the requirements that your lender or financial institution requests. In this article, we will give you some tips to avoid getting a “denied” answer when you qualify for a loan.
Be careful not to make a mistake when you give your data. When filling out a loan application form, it is necessary to be careful in the information provided, since erroneous information may be the cause of a “Denied” stamp.
For this reason, read carefully before writing and previously coordinate the data and information of your work and personal references.
Among the data that the entities analyze are the salary, the length of time in the company, the type of employment contract, as well as the time and amount for which it is reported in the credit bureaus.
A bad reference can be a compelling reason for the financial institution to question the approval of your credit or simply refuse to grant you the money you need.
Preferably the third-party recommendation data is people who speak well of you and your excellent behavior with the debts you acquire.
You may have good debt capacity, truthful and verifiable information, and excellent references, but keep in mind that one of the factors that financial companies study to grant a loan is your credit history.
For this reason, it is very important to be registered in the database of the credit bureaus. Remember that they have both positive and negative information on your financial and business behavior. A savings account in a bank or a minute plan with a communications company are options that, if well managed financially, contribute to maintaining a good credit history and thus building a good name as a financial consumer.
To get pre-approval installment loans you must accomplish all requirements and know what your financial institution is looking for to approve loans. So, let’s see:
Requirements for asking for a loan
Although most of the conditions and requirements will depend on the bank or loan program, there are a series of requirements that must always be met.
The first requirements are to be of legal age, have a valid identity document and establish the amount required for the loan to meet monthly debt payments, as well as give a reason for which the money is needed, that is, explain the purpose in which it is going to be invested.
The preapproval process will be to show solvency to afford the debt and not exceed the maximum finance capacity, so it will be necessary in most cases to provide a guarantee that this debt will be repaid.
For this, in the case of personal loans, the bank may request the endorsement of another person so that, if the client cannot return the money, the responsibility passes to that other person.
Besides, it will be essential to have a good financial history, that is, if the client has requested credits or loans on other occasions, it will appear if they complied with the contract rules or, on the contrary, the deadlines were not met or there was any problem when returning the money.
On the other hand, entities usually ask to get preapproved for a loan is to present proof of income. For this, the self-employed must provide the Social Security fee, the self-employment certificate, and the latest tax return. In the case of employees, it is usually enough to present the latest pay slips.
Another rule could be not to appear on delinquent lists and not have debts for non-payment at the time of requesting the loan.
Also, some banks require as a requirement the fact of having seniority or relationship with the entity, that is, that it is not a new customer. This is related to the fact that the bank asks or advises when granting a loan that conditions are carried out, such as, for example, direct debit of payroll or receipts, home, and car insurance or insurance plan. pensions.
It refers to the willingness of the loan applicant to cover the bank obligation, that is, that you have the determination to pay. At this point, the moral, honesty, and integrity of the applicant are analyzed, for which the banks investigate and analyze the activity in which it is engaged.
- Credit score:
When requesting a loan, banks access the credit bureaus, to analyze the direct and indirect debts existing in the financial system, the original and current amount of the debts, the term of the obligations maintained, the quality of payment, and the guarantee that backs the credit and all credit reports.
A direct debit is understood as that obligation in which the debtor is the beneficiary, while in indirect debt the debtor functions as the joint guarantor of another loan.
- Payment capacity:
Determines the debtor’s solvency face the requested financing, that is, if it has sufficient funds to meet the monthly payments of its obligations, both in the short and long term.
The essential thing at this point is that your income is greater than your expenses and thus demonstrates the ability to repay.
- Quality of guarantee:
Usually, for a personal loan solidarity guarantors are required, that is, what was previously known as guarantees, who are the people who will respond to the bank in case of any non-payment.
This joint guarantor must also meet the same requirements as the loan applicant: the ability to pay and a good credit record.
Depending on the amount of credit requested, the bank will request, in addition to joint guarantees, the backing of collateral with assets, such as vehicles, and/or property mortgage guarantees, that is, land, buildings, or houses.
In both cases, they must be free of encumbrances and duly registered.