To help cover costs from unexpected medical bills to college tuition, many people take out personal loans. These borrowers receive a lump sum from a bank, credit union, or other private specialized lender, anywhere from a couple hundred to several thousand dollars. Over time they are required to pay back this loan with interest. Lenders need to have some sort of evidence that the borrower is capable of paying back the money. Lending money can be risky, and that’s where personal loan qualifications come in. Personal loan qualifications are a set of requirements set by the lender to prove that the borrower can pay them back.
What are Personal Loan Qualifications?
Personal loan qualifications are set by each individual lender. Meeting the application requirements of the lender will determine if a borrower is approved for a loan or not, how much can be borrowed, how favorable the terms and repayment schedule will be, and how much interest is charged.
Typically, personal loan qualifications include the following factors:
- Credit score: Many lenders consider a credit score to be reflective of how likely you are to pay back their loan to you. A low credit score means that lending to you holds more risk, and a higher score shows you have a history of paying back your debts.
- Payment history: This is an important part of your credit score and indicates how faithful you’ve been in paying back previous loans and debts on time.
- Income: Lenders want to see that you are currently employed and have an income that makes it possible for you to make your loan payments.
These personal loan qualifications are set by each lender. Some lenders are more lenient, and some may allow you to apply with a cosigner who has a good credit history.
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