How to improve personal loan applications: 6 ways to boost approval odds

If you need a personal loan, you typically need good credit to qualify. Improving your credit can increase your chances of loan approval

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Before you take out a personal loan, read about 6 things you can do to improve your personal loan application and increase your chances of approval. (Shutterstock)

Personal loans can help you cover a variety of projects and unexpected costs. The best way to get approved for one is with good credit and a low debt-to-income (DTI) ratio. 

If you need a loan, these six tips can help you improve your personal loan application and increase your chances of being approved for the funds you need. 

Shopping around and comparing lenders is a good place to start before submitting a formal personal loan application. Credible makes it easy to see your prequalified personal loan rates from various lenders, all in one place.

1. Decide which type of personal loan you need

Personal loans are installment loans, meaning you receive a lump sum of money up front and then repay the loan with fixed payments over an agreed-upon term. But not all personal loans are created equal. You have many different types of personal loans to choose from, including: 

  • Unsecured loans — These loans let you borrow money without putting anything up as collateral to secure them. In most cases, you’ll need a higher credit score to get approved.
  • Secured loans — Secured loans require you to provide an asset as collateral, like your house or car. If you default on a secured loan, the lender has the right to seize your collateral.
  • Fixed-rate loans — Fixed-rate loans come with a fixed interest rate that doesn’t change over the life of the loan. These loans make it easy for you to budget for your payments.
  • Variable-rate loans — Variable-rate loans have variable interest rates, which fluctuate based on the market. Since these rates can go up or down, variable-rate loans often lead to uncertainty and can be difficult to budget for.
  • Cosigned loans — Cosigned loans are personal loans that you take out with a cosigner, like a family member or close friend, who commits to repaying the loan if you default. If you can’t qualify for a personal loan by yourself or want a lower rate, cosigned loans might be worth pursuing.
  • Joint loans — Joint loans can also increase your chances of loan approval and a more favorable rate. These loans are a lot like cosigned loans except both borrowers can use the funds and are equally responsible for repaying them.
  • Debt consolidation loans — A debt consolidation loan combines multiple, high-interest debts into a single, easy-to-manage loan. These loans can simplify the debt payoff process and potentially save you money on interest since personal loans typically come with lower interest rates than credit cards.
  • Buy-now, pay-later financing — With buy-now, pay-later financing, you can break up online or in-store purchases into interest-free payments. You may use this type of loan to buy something right away with a minimal upfront investment. But if you make a payment late, you could be subject to fees.
  • Payday loans — Payday loans are small, short-term loans that can help hold you over until your next paycheck. You’ll pay them back within two to four weeks. But you should only consider payday loans as a last resort. They come with fees and interest that equate to an APR of 400% or more, according to the Consumer Financial Protection Bureau.

2. Review your credit report

Your credit score is a three-digit number that gives lenders an idea of how likely you are to repay money that you borrow. It’s calculated based on your payment history, the number of accounts you have, the type of accounts, your credit utilization (how much credit you use versus how much available credit you have), and the length of your credit history.

Lenders look at your credit score when they review your loan application. A higher credit score usually increases your chances of being approved and landing a better interest rate. By making on-time payments and keeping your credit utilization low, you can boost your score. 

It’s a good idea to pull your credit reports from the three major credit bureaus at least once a year — you can do this for free by visiting Once you receive your reports, review them for potential errors, such as missed payments that you didn’t actually miss or accounts that you didn’t open. Dispute any mistakes you find with the appropriate credit agency.

Visit Credible to compare personal loan rates from various lenders, without affecting your credit.

3. Improve your credit score

If you have a fair or poor credit score, these are some things you can do to boost your score and increase your chances of personal loan approval: 

  • Pay your bills on time. Even one missed payment can take a toll on your credit score. That’s why it’s important to pay your mortgage, credit cards, auto loans, student loans, and other bills on time, every time.
  • Pay off your debt. The lower your credit utilization ratio, the more likely a lender will be to approve you for a loan. By repaying your debt, you can improve your credit utilization ratio and, in turn, boost your credit score.
  • Don’t close credit card accounts. Even if you don’t use certain credit cards anymore, keep them open. This can increase the length of your credit history, which may help your credit.
  • Limit new credit accounts. Only apply for new credit when you absolutely need it. Applying for too many credit accounts at once can hurt your credit score because they cause hard inquiries on your credit report and lower the average age of your credit accounts.

4. Don’t borrow more than you need

While it may be tempting to request more money than you need to meet a financial goal, like a car repair or kitchen remodel, this can do more harm than good. Since a larger personal loan will come with a higher monthly payment and affect your ability to cover other financial obligations, lenders will consider it more risky. This can make it more difficult for you to get approved for a loan. 

5. Consider applying with a cosigner

A cosigner is typically a family member or close friend with a good credit score and stable income who agrees to repay your loan if you default. 

For example, if you apply with a cosigner because you’re unemployed or your credit is shaky, you may get approved for a loan that you wouldn’t be able to qualify for on your own. You might also secure a lower interest rate, which could save you hundreds or even thousands of dollars over the life of the loan.

While a cosigner can make your personal loan application more attractive to a lender, it’s important to consider the potential drawbacks of applying with one. If you fall behind on your payments, you could put the cosigner in a tough position and damage your relationship — as well as their credit. This is why you should only apply with a cosigner if you’re confident you’ll be able to pay back your loan as agreed.

Also, it’s difficult to remove a cosigner from a loan once the funds have been disbursed. Your cosigner may be stuck with the responsibility for the debt for quite some time until you pay it off. Make sure the cosigner you choose not only understands this risk, but accepts it. 

6. Find the best personal loan lender for you

There’s no shortage of personal loans on the market. Take the time to shop around and compare a variety of products from banks, credit unions, and online lenders. Look at their amounts, interest rates, fees, and any special perks they might offer.

This can help you find the ideal personal loan for your unique situation. 

Credible makes it a breeze to compare personal loan rates from multiple lenders without a hard credit pull or any effect on your credit.