5 Ways to Improve Your Chances of Online Loan Approval

Published on October 23, 2020 by Daniel Azzoli

Person researching online loan approval on their laptop

Whenever you’re trying to accomplish anything throughout the course of your life, you should always give it your best effort. And aiming to get online loan approval is no exception. If you’re looking to get approved for a loan, it can help to understand how exactly you’re being evaluated and which aspects of your financial profile you need to focus on.

When you boil it down, your chances for approval rest largely on proving that you’ll be able to repay your loan. But how do you do that? Well, a financial institution will look at a number of different factors when evaluating your request as a borrower. This can include things like your credit history, your income, and more. So, if a financial institution looks at your credit, you need to pay attention to it. Make sure to correct a few specific financial issues you may be having to prove that you’ll be able to pay back your loan. It stands to reason that you may be able to improve your chances of being approved!

While there’s no such thing as a guaranteed loan approval, this doesn’t mean you can’t find ways to put your best foot forward. Today, we’re going to look at how to do these things and some additional things you can do that may help you get approved for a loan.

1. Focus on Your Credit History

One of the first things you’ll want to do before applying for an online loan – or a loan of any kind for that matter – is to take a look at your credit score. Like we mentioned, your credit score is often a key factor in getting online loan approval, as it gives a financial institution a better idea of you as a borrower. Here are some things you may want to do when it comes to your credit.

Take a Peek at Your Credit Report

Start this process by looking at your credit report. Fortunately for you, if you live in the U.S., you’re entitled to see your credit report for free once a year from each of the three major credit bureaus (Equifax, Experian, TransUnion).[1] This means that you can take a look at your credit report three times a year without charge. Take advantage of this to keep tabs on the health of your credit.

Consider What Credit Score You’ll Need for Online Loan Approval

Now that you have your credit score, you’ll want to look into what your score will actually need to be in order to get approved for the loan you’re looking to apply for. Different financial institutions will require different scores for different types of loans, and your score can sometimes also have an impact on the rates and terms of your loan. Do some research to find out what you need your score to be for the types of loan you’re looking for.

Person taking notes on online loan approval.

If you find that your credit score isn’t where it needs to be, this doesn’t necessarily mean that you’re out of options. There are online loans for bad credit that may be able to help you out. There are a couple of things you’ll need to keep in mind before applying for these types of loans. Firstly, because you have poor or thin credit, financial institutions may likely feel less assured of your ability to repay the loan. Because of this, the rates of the loans that may be available to you could be relatively high. Secondly, because these loans are expensive, they should really only be used for emergency expenses that you can’t cover with your emergency savings fund.

Correct Any Errors on Your Credit Report

Another important task to take care of when it comes to your credit report is to make sure there aren’t any errors. You may find that there are some delinquencies on your report that shouldn’t be there, and these could be doing damage to your credit score. They could even be a warning sign for identity theft. So, if you run into this problem, you’ll need to report these errors to get them removed. To learn more about this process, take a look at this article.

2. Make Sure Your Income is Regular Before Applying

One of the most important factors that a financial institution will look at when deciding whether to lend to you is your level of income. After all, if you don’t have enough money coming in, how can you be expected to pay back your loan? So, if you’re looking for a loan approval, such as an online loan approval, it may be best to wait until your income is consistent. This can improve the likelihood of your request getting approved, and it may even affect the rates and terms you’re approved for.

Now, this may sound easier said than done. Boosting your income can take a lot of time and effort, and if you’re in need of a loan to cover an emergency expense, you may not be able to wait. However, if the loan you’re looking for is something less urgent and more substantial like a mortgage, you might want to hold off on applying if your income is unsteady.

3. Manage the Debt You Already Have

If you already have a list of outstanding debts, you may not necessarily be immediately ruled out for online loan approval, but you should start to manage the debt you do have before submitting an application. Here are some things that may help you with this process.

Consider Your Debt-to-Income Ratio

On top of your income and credit score, a financial institution may also look at how much debt you’re carrying in relation to your income. If you’re already in the process of paying off a number of different forms of debt, they’ll keep this in consideration when deciding whether to lend to you. To do this, they look at what’s called your debt-to-income ratio (DTI). It may vary between financial institutions, but they typically prefer to see a DTI that falls below 36%.[2] If you can manage to start chipping away at some of your debt to lower this number, you may have a better chance of getting approved for a new loan.

Avoid Maxing Out Revolving Credit

Credit cards are one of the most common types of debt you may have, so it’s important to use it wisely. This means not overspending on credit and doing your best to pay down your debt in a timely manner. Paying off your credit can help to increase your chances of loan approval by lowering your DTI, but it can also help to lower your credit utilization ratio. This is a number that shows the total amount of revolving credit you’re carrying compared to how much credit you have available to you.

Person shopping online.

So for example, let’s say you have one credit card and one personal line of credit. Each has a maximum credit limit of $2,000. Between the two of them, that’s a total of $4,000. If you’ve currently used up $1,000 of credit on both accounts (bringing you up to $2,000 in total), your credit utilization ratio would be at 50%. Generally, you’re going to want to keep this number at 30% or less.[3]

Why is this important? Well, part of what makes up your credit score is this number, so if you keep it at a healthy percentage, you may be able to have a positive effect on your credit score. And with a better credit score, you might have an easier time getting approved for a loan.

4. Pick the Financial Institution That Suits You

Getting a grip on personal details like your credit score and your income is the first step. Next, you’ll need to start to evaluate financial institutions to find a good match. Take a look online and compare the rates and terms of different loans from various lenders. You should also evaluate them to make sure they’re a responsible lending company.

Make sure you have a clear intent when you’re going through this process. If you’re looking for a loan to help you buy a car, you shouldn’t be looking at loans that are intended to help you with emergencies. And if you have poor credit, you shouldn’t be focused on loans that require you to have a really strong credit score to get approved. Overall, be thorough and make sure you’re looking at the potential options that are appropriate for your situation.

5. Consider Getting a Cosigner

If you’ve really put your best foot forward and are still having a hard time getting an online loan approval, you may want to consider getting a cosigner to help with the loan approval process. The role of a cosigner is to make any payments that you’re unable to. Typically, you’d get a cosigner with a steady income and a good credit score. This provides the financial institution with more assurance that the loan will be paid.

People shaking hands over online loan approval.

Just keep in mind that asking someone to cosign a loan is not a small request. By agreeing, they’ll be taking on a substantial risk. If you’re unable to make your payments, they’ll need to step in and do so themselves. Otherwise, they risk potential damage to their credit score, late fees, and generally negative financial consequences.

Keep Your Financial Standing in Good Health

Applying for a loan is a big deal, and it’s something you should really only do when you absolutely need to. But if you do end up going through the loan approval process, you’re going to want to give yourself the best chance of success. While it might require some extra work on your part, putting in that extra effort can really help and ultimately may end up saving you money in the end!

Make sure to do your research, evaluate your options, and put your best foot forward. We hope this list has helped!

Disclaimer: This article provides general information only and does not constitute financial, legal or other professional advice. For full details, see CreditFresh’s Terms of Use.


[1] https://www.annualcreditreport.com/index.action

[2] https://www.investopedia.com/ask/answers/081214/whats-considered-be-good-debttoincome-dti-ratio.asp

[3] https://www.thebalance.com/what-is-a-good-credit-utilization-ratio-960548