Even before the COVID-19 pandemic took hold, taking out a personal loan is quite difficult. But now, a personal loan might be more difficult to get. A COVID-19 economy has enforced some creditors to reinforce and stiffen their credit standards and assess borrowers thoroughly.
However, the good news is that it is still manageable to qualify for a personal loan. The crisis has given emphasis to several things borrowers have been required with in the past—for example, a high credit score and income.
For a little help, below are some things you can do to boost your chances or likelihood of taking out a personal loan in a COVID-19 economy. Read on to know more!
Maintain A High Credit Score
Keep in mind that it’s not possible to build credit overnight. Even so, now is not the time to let your credit drop a few scores. Normally, borrowers with stellar credit receive the lowest APR or annual percentage rates in a loan.
On the other hand, borrowers with bad or fair credit receive no offer or a higher rate. Take note that creditors have less forbearance for high-risk borrowers with large amounts of debt or low credit scores than they did even before the health crisis took hold.
Moreover, banks have marked up their credit standards and are granting loans more conventionally, unlike the time of the Great Recession. According to the most recent quarterly senior loan officer, about 12 percent said their credit standards had stiffened greatly, and 49 percent said their credit standards have become more stringent somewhat.
On-time credit card and loan payments and a high credit score will, without a doubt, help you be eligible for a personal loan today. However, if you have missed one or two payments in the past months, lenders will see you as a risky and struggling borrower. Consider looking at online lending institutions like Planet-loans.com to explore more borrowing options.
Ensure Your Income Is Solid
Because of the adverse impact of the pandemic in the economy, lenders might investigate more to ensure your income is intact. Say, for example, an online lending platform which offers personal loans to people with stellar credit scores, manually examining the employment and income history of a borrower has become more common.
Further, some platforms have made their income verification stage up to date. Before, online lenders only used the details and record the borrower provided, such as cash flow, place of residence, and employment, to make sure your income is intact.
However, now, lenders directly verify the income of the borrowers without relying solely on employment history. The good news is that the process does not typically need documents that most creditors ask for, like recent pay stubs and W-2s.
What’s more, creditors might want to look at a longer income history than before. Financing a loan before requires income validations for the past two years. However, with our current situation, lenders may need to see at least four years’ worth of income verification.
What’s worse, lenders may want to know what you actually do for work. That said, doctors, accountants, and engineers may get better offers than borrowers with unreliable income.
Look For A Good Interest Rate
Regardless if you have a solid income and stellar credit, you may not be able to obtain the same loan offer you’d have before the global health crisis. Some creditors have curtailed the loan amount you can borrow or raised their fees and minimum APRs.
The best thing to do is to shop around and compare lenders, which includes credit unions, banks, and online lenders. If you are a credit union member, make sure to find a loan with the best term and lowest rate.
Moreover, some banks and online lenders usually let borrowers pre-qualify for a loan. For this reason, borrowers can see if they are eligible and the interest rate they may get. Make use of pre-qualified loan information to compare offers, compute your monthly payments, and determine if it fits your budget.
If, for instance, the monthly payments are expensive or you cannot qualify for a loan right now, it is best to wait until you can manage to repay the loan.
Takeaway
The COVID-19 pandemic has fabricated a financial difficulty for many. If you are one of them, then you are likely waiting for a stimulus package from the government. But until then, keep in mind that there are bills you need to pay.
Personal loans from a credit union or bank could help you by providing quick money. However, be wary and mindful before you sign and accept the loan. Make sure you qualify for a personal loan first before applying for one. Ready all the documentation, as well.
