10 Things to Do to Get Your Loan Approved Faster
Loans are readily available, but not every applicant will get their loans approved. There are several ways to simplify the loan application process. Understanding the process better will increase your chances of getting your loan application approved faster. Here are some of the things you need to do to get your loan approved faster:
1. Apply for Paperless Loans
You can meet several online loan aggregates to help get your loan approved in a quick, paperless manner. The loans require fewer documents and have a faster turnaround time. If your Credit Card Company or bank pre-approves a loan based on your current profile, you can access it with minimal documentation.
2. Know What You Need
Before applying for any loan, ensure to do some research to help you get quick approval. There are several loan options available for different needs, such as educational costs, personal needs, home purchases, automobile, etc. Knowing your preferences can increase your approval chances. For instance, if you’re looking to raise some money for your business, there are collateral-free loans, working capital loans, term loans, etc. Understand your requirements to help you shortlist the kind of loan that suits your specific need.
3. Prepare Every Important Document
The first step in speeding up your loan process involves getting documents across to your loan officer. Most loans demand documents to verify your identity and ensure you can afford the loan payment every month and complete the repayment within the specified time.
The demand for these documents varies, depending on the type of loan. For instance, to get VA loans in Arizona, you need to provide the following documents:
- Two years of IRS 1040s
- Two years of 1099s
- Two years of W-2s
- Recent pay stubs (within the last 30 days)
- Pension award letter
- VA disability award letter
- Retirement account statement (Military)
- Social Security benefit letter
- Accompanying IRS forms/schedules (all pages)
4. Be Honest and Accurate
When you start the application process, be as honest and accurate as possible. In our current world, most lenders will thoroughly verify loan applicants’ financial data before releasing funds. Underwriters usually cross-reference the applicant’s information to ascertain their truthfulness and determine if they’ll make great candidates for the loan.
5. Know Your Credit Score
Making an informed loan decision is easy for those who know their Credit Score. Most times, loan seekers don’t understand what a “Credit Score” is until they get deep into the application process — this isn’t ideal. These loan companies gradually attach interest rates to the applicant’s Credit Score, which reflects their creditworthiness. So, you need to do a periodic check on your Credit Score, especially before applying for a Credit Card or loan.
Anyone can check their score online at any time. You can get one free annual Credit Report from some credit information companies, including Experian and CIBIL. Alternatively, you can instantly access your Credit Reports via third-party generators. A Credit Score is described as a numerical interpretation of how creditworthy a borrower’s, ranging from 300 – 900. Anyone with a score higher than 750 can access loans at good interest rates.
6. Evaluate Your Loan Repayment Capacity
Before approving your loan, most banks require your DTI (Debt to Income ratio). The ratio is one’s gross income after subtracting their existing debts. A low DTI ratio means that one maintains a stable balance between income and debt and can manage additional debt. On the other hand, a high ratio limits your ability to access further loans and can result in loan rejection.
You can easily calculate your DTI before applying for any loan. For instance, you earn a gross monthly income of $8,000, and you pay $2,500 for Home Loan EMI, $700 as a Car Loan, and $600 for other debts. This implies a $3,800 total monthly debt, hence a DTI of $3,800/$8,000 *100 = 47.5, which is high. Before applying for a new loan, you may need to clear the existing ones.
7. Approach Your Bank
You can increase your approval chances by applying at a bank where you have a business account or savings account. A bank that knows you and a bit about your financial level is a plus, as it will quicken your loan process. Besides, you can utilize a great customer-banker relationship and get lower interest rates and better deals.
8. Find Out If There’s Need for Collateral Security
Some banks may require collateral securities to approve a loan. This demand depends on the kind of loan you seek. Business and Education loans require collateral. It doesn’t always imply a fixed asset, such as a commercial or residential property. You can use financial instruments, such as LIC policies, NSC certificates, and bank deposits.
9. Be Available for Any Further Questions
After getting your documents to the loan officer, the underwriter will review the loan before approval. Most times, the underwriter might request additional information or have questions. If it happens, relax — it’s quite normal. But since they might need an urgent response to these requests, let your lender know the best way to contact you during work hours and off-work hours.
Give your loan specialist every contact details, including email address, home and cell phone numbers, and fax number (if available). Texting is usually the fastest means of communication between a borrower and a loan officer. The faster you provide documents or answer questions, the sooner your chances of getting your loan approved.
10. Have Proper Proof for Any Special Circumstances
If you’re not in a typical home buying condition, don’t be discouraged. Several loan applicants have special circumstances, which include separation from their spouse or re-enlisting. Be prepared to pass on any document requested by your loan officer promptly. Some common documents that most lenders may request include:
- Alive & Well Certificate
- Proof of re-enlistment
- POA legal documents
- Letter from your commanding officer
- Proof of enlistment (over 12 months)
- Any other documentation that supports your circumstance
Finally, you need to be patient with the loan process and don’t make multiple applications. An increase in your loan applications will cause more hits on your Credit Score, thereby reducing your loan approval chances. When applying for a loan, ensure that the lenders know you’re a credible borrower with every base covered. Your chances of getting a loan approval will increase after fulfilling the loan eligibility requirements, having a great Credit Score, and watertight documentation.