How Loans are Approved?

A range of factors come into play when the decision is made to approve a loan application or not. Before a lending provider decides to approve a loan they need to identify the degree of risk they are undertaking. For a start this can be based upon the applicants past actions and behaviour. This is where the interest rate comes into play. The higher the interest rate placed on the personal loan, the greater the degree of risk that the lending provider has identified.



For starters, can you afford to meet the repayment terms of the proposed loan agreement? Will you be able to repay the full loan amount? Are you in a stable employment situation? All questions which loan providers will seek answers for to help inform their loan approval decision.


Past behaviour and actions

More specifically this is referring to your credit behaviour. Late, or failure to make regular repayments will have an adverse effect on your credit score. Effectively, placing a black mark next to your personal loan application in the eyes of the lender. If you have received a loan in the past then the provider will check your repayment history to see if you paid your instalments on time, all the time.


Credit providers are taking on risk by lending to you. To grant a personal loan there needs to be a level of comfort from the perspective of the lending provider to ensure loan repayments conditions are met and the lender receives the borrowed amount. Paid back in full, and on time. Make it easy to have your loan approved by reviewing your actions and taking steps to improve in advance.