How to boost your chance of getting personal loan approval

Do these five things before you apply. (iStock)

The total number of personal loans Americans borrowed reached a high of $162 billion during the first quarter of 2020, according to TransUnion. However, the growth rate toward the end of the quarter was also the slowest in more than two years, the credit reporting agency claimed. 

Getting a personal loan approval could be harder due to the coronavirus pandemic — as lenders get more conservative and raise the credit score requirements on unsecured loans. Credible can help determine if you'd be a good candidate for a personal loan. Just enter some information into Credible's free online tools and discover what kind of rates you qualify for today.

But before you officially start the personal loan application process, you may want to take these five steps to boost your chance of getting approved.

1. Go through your credit report

Lenders look at borrowers’ credit scores to help them assess their risk levels. It's hard to get approved for a loan with bad credit, so you'll want to check your credit score and see where you stand before applying. If you have bad credit, don't worry, there are several ways you can boost your credit score to eventually secure approval.

If you already have a high credit score or are confident in your credit history, then you can enter your desired personal loan amount into Credible's free tools and start the application process.


Unfortunately, errors in your credit report could lower your credit score. A study from the Federal Trade Commission found that one in five consumers have a mistake on their report that could result in unfavorable loan terms. 

You're entitled to a free credit report from the three credit bureaus each year. After obtaining it, look for errors like missed payments or accounts you didn’t open. If you find a mistake or negative items on your credit report, dispute it with the credit bureau and reach out to the company that generated the report to fix the error.

2. Look at your ratios

In addition to your credit history, lenders will look at your debt-to-income ratio, which is the amount of debt you have compared to your income. If you have a lower percentage, then you likely have a manageable debt level — an important factor when applying for a personal loan.

To see where you currently stand, turn to Credible. Credible can help you compare multiple lenders at once and help you find the best deals depending on your financial situation.


Before you apply, do the math, adding up your loan payments, such as student or vehicle notes. Monthly expenses like rent or utilities aren’t included, and a ratio below 40% is preferred.

For example, if you have an income of $2,000 each month and a student loan payment of $400 and a car loan that's $325, your debt-to-income ratio is 36.25%. But if you also have credit card debt with a monthly minimum payment of $150, your ratio is 43.75%, which could make approval challenging. Before you apply, pay down debt to reduce your ratio.

Another number that lenders consider is your debt utilization ratio, which is the amount of revolving credit you've used compared to how much is available. A number of less than 30% is preferred. To improve this ratio, you could request an increase in your credit limit. However, make sure the creditor doesn’t require a hard inquiry on your credit, which could backfire and lower your credit score.

3. Determine how much you need to borrow

It can be tempting to apply for more than you need, just in case. But requesting too much money can be a red flag for lenders. Before you enter a loan amount, consider your other financial obligations and how the new loan would impact your monthly budget.

It can help to use a personal loan calculator like this one from Credible to determine your monthly payment and how it would impact your cash flow. Once you determine your monthly payments and the impact on your savings account, then use Credible to compare rates.


A larger loan could put a strain on your finances, causing a lender to potentially decline your application. A personal loan calculator can also help you estimate how much you’d qualify for.

4. Get a cosigner

If your credit score is fair or if you are just starting out and haven’t yet established a credit history, you can increase your chances of approval if you have a cosigner who has good or excellent credit. Lenders will be more likely to give you money because, if you cannot pay for any reason, the cosigner has agreed to assume responsibility.

A cosigner can be a family member or friend, but you’ll want to tread lightly into this type of arrangement. If you think there’s any chance that you may lose your job or become unable to make the monthly payments, you could permanently damage your relationship with the cosigner by defaulting. And if they become unable to pay, their credit could suffer, as well.


5. Shop and compare lenders

Finally, look for a lender where you have the best chance for approval. Many will disclose their requirements on their website, including a minimum credit score or annual income. When you find a lender that fits your qualifications and offers the best rates, you can move forward with your application instead of wasting your time.

Visit Credible to explore your options. You can compare rates and lenders all on one page.


Ultimately, the best personal loan is one that doesn’t hurt your financial wellbeing. Make sure you can handle the monthly payment without straining your budget. By doing the groundwork before you fill out the personal loan application, you can get the best rate from lenders.