Get approved for a loan in 5 easy steps
When applying for a consolidation loan, we hope that we will be successful. However, the success of your application depends on a number of things: your income, credit score, and ability to repay the loan. It's unique to each person. But, this shouldn't scare you. In fact, it should encourage you to take the necessary steps to reduce your debt, increase your credit score, and get the best loan on the market.
Here are 5 things that you should do now if you want to apply for a loan.
- Reduce your debt-to-income ratio
Before you apply for a loan, check up on your debt-to-income ratio. It's the percentage of your income that’s used to pay off debts and is calculated by dividing the total you owe by the total amount that you earn. Lenders use this ratio to determine your borrowing risk. A low debt-to-income ratio shows a good balance between income and debt, and your ability to repay a loan. Lower your debt-to-income ratio by reducing your debt and increasing your income, if possible. Focus on paying off credit card debt and closing any store accounts you might have.
- Continue to work on your credit score
When giving out unsecured loans, creditors use your credit score to decide whether to give you a loan or not. The higher your credit score, the higher your chances of being approved for your loan. If your credit score is not where it should be, consider steps to improve it. Small things like paying your accounts on time go a long way to reducing debt and building your confidence.
- Don't apply for more than one loan
Applying for more than one loan at the same time is considered risky credit behavior. It's a major red flag for lenders, who could assume that your income is not enough to finance your needs and your loan repayments. Also, frequently applying for loans increases the number of hard inquiries on your credit report, lowering your credit score.
- Include all income sources
Your income plays an important part in your application process. Make sure you list all your sources of income on your loan application. Include sources of income over and above your nine-to-five. For example: Do you run a successful side hustle? List it. Investments? Income from rentals? Include those too.
- Choose a good lender
With the number of online loan scams increasing, it's important to choose a legitimate lender, such as a bank. Legitimate lenders are usually registered with the National Credit Regulator. However, if you're not sure, it’s always safest to apply for a loan with a bank. At African Bank, you can get a Consolidation Loan to the value of R250 000. You can combine up to 5 loans into one Consolidation Loan, and save with lower repayments and a fixed interest rate.