What Are the Requirements for a Personal Loan Application?
Personal loans can be quite helpful when making a large purchase or consolidating debt. They’re good to have in a variety of financial situations, but there’s an application process that every borrower needs to go through before attaining that lump sum of money.
Various lenders may have different additional requirements, with some even placing higher importance on other elements than others. However, each individual and institution handing out personal loans will pretty much ask you for the same set of information at all times.
Keep yourself informed so that creating your personal loan application will go smoothly. Here are the potential requirements you’ll be asked for:
1) Credit Score
The credit score of a person is one of the most important numbers on your documents. Whatever rating you’re given greatly reflects your financial capabilities, which most lenders take into account. Anyone in the 600 and 800 above range will likely have no trouble with getting a personal loan, but going below that is a different story.
2) Credit History
Credit history is another important factor that can make or break your application. Lenders only try to deal with borrowers who have a good to decent payment history. Outstanding debt and late repayment are often seen as red flags, so it’s recommended to take care of any impending business before arranging your application.
3) Proof of Income
Proof of income requirements is usually given to borrowers to distinguish those who have the capabilities to pay back the money that they take. How much income a borrower needs to have can depend on the amount they’re going to take out through the personal loan.
Tax returns and monthly bank statements are acceptable proof of income, and they can be used by just about any worker. Employees can also seek a signed letter from their employer as evidence of their income.
4) DTI Ratio
The DTI or debt-to-income ratio is a specific number that calculates the borrower’s income in comparison to the debt that they have. This ratio usually takes into account the past loans that you haven’t paid for alongside the potential amount you would have to pay out.
It’s ideal for a borrower’s income to be bigger than the amount of their debt, but this will come in a percentage form upon finishing the calculation. DTI ratios lower than 40% to 50% are quite promising, as it means that they’ll make the payments to the personal loan with no problem.
5) Collateral Assets
There are certain personal loans where a lender will require borrowers to show what their most valuable assets are. Some may showcase homes, vehicles, electronic devices, and more. Cash accounts and other types of investments are also counted as assets.
It will be up for discussion on whether or not those assets can serve as collateral for your repayment period. If you cannot pay back the loan properly, borrowers under that agreement would have to give up those assets to cover the balance.
There will be different formats and requirements but just be prepared with the necessary documentation when applying for a personal loan. With enough determination and the right papers, you’re sure to get the money you need.
Want to take out personal loans in Nashville? Mid-Town Finance Nashville offers various personal loan sizes with reasonable and affordable payment plans so that you can take care of all your needs. Contact us today!