Top Tips To Get Your Loan Application Approved
Applying for a loan can be a tedious task that will require you to spend a major chunk of your time. Don’t worry, applying for a loan is not as hard as you think it is. Follow our tips below to increase the chances of your loan application approval!
Check Your Financial Records
Before you start applying for a loan, check where you stand financially. The first thing a bank will look at when you submit a loan application is your credit record. If you have bad payment habits like missing payments or making frequent late payments, chances are the bank will not approve your loan application.
Banks are financial institutions that receive deposits from customers which will then be used to fund their financial products such as personal loans, mortgage loans and hire purchase loans. In return, the bank charges interest on these borrowers to gain profit, but this also exposes it to more risks. A borrower may pay late, which will incur loss to its many investors, or not pay at all.
This is why having a strong financial track record will work in your favour when dealing with banks. If your current financial situation does not look good, improve your financial records first before you apply for a loan.
Bank Negara has the Central Credit Reference Information System (CCRIS) which collects credit information on borrowers from banks and supplies the information back to them. But, you can also have access to this report too.
Another credit reporting system in Malaysia is CTOS which banks also look at when processing applications to verify your credit history. You can get your CTOS report from MyCTOS.
Polish your credit record and make prompt payments for all of your financial commitments for at least 6 months (the longer the better!) before applying. Remember, even if you are not applying for a loan you should still be making prompt payments, not to mention it helps increase the chances of the bank approving your application.
Through your credit report, banks will be able to see your financial history of up to 6 months. If you have been missing or making late payments a few months before you apply for a loan, there’s a strong possibility the bank will reject your loan application because of your poor payment pattern.
Read The Fine Print
As a general rule, banks will offer a loan amount of not more than 30% of your current financial commitments. For personal loans, banks will usually offer between 2 to 3 times your monthly salary. Calculate your financial commitments before you make the application and see if you can really afford to take up a loan. Some people may also forget to look at the loan’s requirements such as the amount of minimum salary required.
Check to see that you are eligible in the first place to avoid raising your hopes only to have your loan application rejected. For example, if your mortgage loan application was rejected, it could be due to a variety of reasons like your current debt service ratio, submitted documents or even your employment status! You can read more about the top 10 reasons your mortgage may have been rejected here.
Create A Credit History
Banks are also reluctant to approve loan applications from individuals without any credit history. Think someone who has never had a credit card or financial commitments (such as hire purchase loan or mortgage loan). This individual will then have no credit record for the bank to analyse when they process the loan application. Hence, it’s good to have any sort of financial commitment first to increase your loan application approval.
We’re not suggesting that you should go out and buy a car or a house in order to get your loan approved, think of a financial commitment of a smaller scale, like a credit card. Get a basic credit card with no annual fee, and use it to make purchases. You can then take advantage of it and save money by making use of the cashback and rewards points. At the same time, build a good credit record to ease your loan application by making a prompt payment each month. Don’t know which basic credit card is best for you? Just click the button below to compare the best basic credit cards in Malaysia!
Lastly, why don’t you put yourself in the shoes of a bank? That way, you can also better evaluate yourself before you apply for a loan. Different banks have different lending policies depending on the risk appetite of the banks. However, follow the tips above to increase the chances of getting your loan application approved!
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