With runaway inflation and higher interest rates, financial institutions are increasingly watchful of their lending guidelines, so you should be aware of what is needed to prepare adequately. The Central Bank of Philippines had raised its key overnight rate to 4%, in line with market expectations. This is the third time interest rates have increased and the corresponding interest rates on the overnight lending rates were also raised accordingly. What this means is higher borrowing costs so it is understandable that financial institutions want to ensure that borrowers stick to proper guidelines.
A personal loan can still be a smart financial move with proper planning and a good starting point is the following guidelines on personal loans in the Philippines. Besides comparing interest rates, the speed of approval, requirements, loan amount, and repayment terms, you should also be focusing on how to prepare your application to avoid rejection.
Steer clear of these common causes which can slow down the application approval, if not getting declined:
- Unstable or insufficient monthly income
There is a reason that the first thing required for a loan application is your income statement or cash flow statement. Regardless of how much you have in your bank account, your application will not be approved if you cannot show that you have a regular income to cover the monthly repayments. Set a realistic principal loan amount in your application according to your cash flow to ensure you can meet the minimum income requirement for the lender before making the application as a rejection can affect your credit report.
- A bad credit record indicating poor financial health
Besides looking at whether there is sufficient income, your credit health is a key factor for financial institutions to decide whether to approve your loan and what rate to offer you. Obvious factors like unpaid loans, too much debt, and missed repayments affect your credit report but even repeated rejected loan applications and applying for too many credit facilities in a short period of time can also impact your credit standing. Remember, you should always check your credit health before applying for a loan or credit card.
- Incomplete application, failure to provide details or not fulfilling requirements
Even if you meet the income requirement and have a good credit standing, not being properly prepared when submitting your application forms can lead to stalled or rejected loans. Always take good care of your financial records, act promptly to correct any errors in your credit report. Financial institutions need to be able to verify factual information like mortgages and employment to ensure that accurate and relevant information is provided in your application. Lookout for requirements those are specific to the particular financial institution which can vary.
Even a simple mistake like incorrect home or work address can negatively impact your application. Finally, double-check every piece of information you provide before you submit your application and follow up on the application with the financial institution.
- Not checking your qualification before applying
Besides taking every opportunity available to compare personal loan products and educate yourself, you should also check your eligibility first to avoid getting rejected. You can do this by talking to the right people who can walk you through the requirements and recommend the product that has a higher chance of approval. This simple step can help to ensure you are fully prepared when you apply for your next personal loan.