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Lenders investigate aspects of your personal and financial history to determine the status of your loan application and rates. Several factors, including your credit and employment history, are explored, along with your income level. If you’re about to apply for a loan, understand what lenders consider before they decide on approval.

What Should You Prepare When Applying for a Loan? 

1. FICO Score

To determine the amount of risk a lender accepts in approving a loan, they look to your FICO score. Lenders use this to establish how much the loan will be and the rate at which you’ll pay it back.

It also plays a role in getting approved for the loan entirely. Your FICO score will range between 300 and 850.

Before you apply for a loan, research your score. The higher it is, the more likely you will be approved, and the lower the rate you will have to pay. You can increase your score by making your credit card, car, and mortgage payments on time.

Your credit history will also be considered. The longer you’ve had a history of credit, the more your loan will be.

2. Income

Apply for a loanYour monthly income matters, especially if you’re applying for a sizeable loan. To establish that you’ll be able to pay back the loan, lenders will ask for at least two months of pay stubs.

3. Employment History

The lender will request your W-2 from the last year and take a look at your employment history. Lenders look for potential stability clients. If you’ve been with your job for several years, you’ll be considered reliable.

If you’ve only just started at a new position, you should wait until you’ve been employed at this company for at least a year before applying for a loan.

4. Current Debts

Lenders are unlikely to approve a loan to someone with existing debts. It could make you less capable of paying your loans back.

If you have one or more outstanding debts, compare your monthly payments to your monthly income. If the payments are below 35% of your income, your loan is more likely to be approved.

 

If you need to apply for a loan, reach out to Hawaii County Employees Federal Credit Union. For 80 years, they’ve been a trustworthy member-owned credit union that offers its customers low-cost loans at rates that will meet your budget. They provide automatic billing, so you never miss a payment and 24/7 account information access. If you’re in the Hilo area, their professionals are available at (808) 935-2969. For more information on their credit line consolidations and student loans, visit their website.

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