When it comes to a personal loan, there are a lot of things to know. We put together a few things to help you increase your chance of getting approved and saving some money.

Do The Leg Work

Not all personal loans are the same. Even at the same bank, two different people can have different-looking loans. Take the time to shop around at different financial institutions to find the personal loan that best fits your financial situation.

Know Your Credit Score

One major consideration in your loan process is your credit score. This three-digit number gives lenders a good idea of your financial strength. The higher the score, the better your chance of getting approved.

If you want to know what a good credit score is:

  • 800+: Exceptional
  • 740-799: Very good
  • 670-739: Good
  • 580-669: Fair
  • 579 and below: Poor

Everyone is entitled to a free weekly credit report from each of the three credit reporting agencies (Equifax, Experian, and TransUnion). Visit Free Score Online or any of the bureaus’ sites to access yours. 

If your score is low, it would be beneficial to work to raise it as high as possible before filing for the loan.

Debt-to-Income Ratio

Another factor in determining whether or not your loan will be approved is your debt-to-income ratio. That’s the percentage of your monthly debt payments divided by your monthly income.

Different lenders will have different standards for debt-to-income ratios. Most lenders want your total monthly debts to consume no more than 36% of your gross monthly income, but some may approve up to 50% depending on the strength of the rest of your financial profile. The lower your debt-to-income ratio, though, the better your odds of qualifying for loans with competitive rates. 

Boosting your income and lowering your debt improves your debt-to-income ratio. That’s why it’s important to list all incomes in your application, including any side jobs or secondary incomes. If you’ve been thinking about starting a side hustle, now might be a good time!

Budget For the Debt

Speaking of debt-to-income ratio, make sure you can handle the monthly payments before you sign off on the loan.

Work up a monthly budget sheet to see how much cash you have on hand each month and ensure you can make monthly loan payments without missing other payments elsewhere.

Consider a Co-Signer

Not sure if your credit score or debt-to-income ratio will be good enough to get approved? Add a co-signer with stronger credit.

Before adding someone, make sure to have an honest conversation about the responsibility that comes with being a co-signer–because they are just as equally responsible for repaying the loan as you are.

Fix Your Rate

Is your loan interest rate fixed or variable? Some lenders do offer variable rates. The rates might go down, but they can also go up during the loan term. As personal loans are for a relatively shorter period, it is best to opt for a fixed interest rate. In this way, you can fix your monthly payment. And you can easily budget your expenses.

Don’t Over-Ask

Whatever you’re taking out the loan for, stick to what you need. Requesting more money than what you need can be seen as risky by lenders.

A larger personal loan also squeezes your budget, as higher loan payments impact your ability to meet other financial obligations, such as student loans or mortgage payments.

Apply Online

It’s good to talk with a Loan Officer when getting a loan, especially if it’s your first time. They can answer questions and provide valuable information.

Being able to apply online gives you the opportunity to complete the process from anywhere, at your own pace.  You will also be able to provide the required information electronically.  

Loans with RiverWind are already reviewed in a timely manner, and applying online can enhance the overall loan experience. You can apply online here.

Know the Ways to Save

Now that you’ve been approved for the loan and signed on the dotted line, there are a few things to know.

If you look closely at your paperwork, you’ll see exactly how much interest you’ll pay over the life of the loan and how long it will take you to pay it off.

Luckily, there are ways to save on interest, assuming you don’t have a prepayment penalty:

  • Make more frequent payments
  • Pay more than the minimum amount required each month
  • Set up automatic payments to avoid late fees or excessive interest charges
  • Make lump-sum payments when you have a windfall (tax refund, employer bonus, etc.)

If you have any questions about personal loans, feel free to visit the personal loan page of our website and contact one of our Loan Officers.