Tips to Help Your Short-Term Personal Loan Application

Do you need a short-term personal loan to cover an imminent expense? If so, use these tips to give your short-term personal loan application the best chance possible of being approved.

Pay Down Other Debt Before Applying

Not everyone who's applying for a short-term personal loan application is in a financial position where they can pay down debt. If you're able to reduce the amount of other debt that you have, though, doing so will benefit your application in two ways.

First, you'll have a lower debt-to-income ratio. This is a number that reflects how much of your monthly income goes toward required debt payments, and it'll improve if you don't have to pay as much on minimum payments each month. Lenders will look at the ratio when the review your application, and they'll grant approval if the ratio is reasonable.

Second, lowering your debt will help improve your credit score. The amount of debt you have accounts for 30 percent of your credit score, and lenders will consider your score not only to determine approval but also to determine the interest rate on a short-term personal loan. The better your score is, the more likely you are to qualify for the best available loans.

Paying down debt as you apply for a loan often isn't easy to do, but you might have ways to reduce your outstanding debt load. If you can sell anything for some extra money or have a little savings piled up, liquidating these resources to pay down debt could be a good move.

Importantly, you need to make your debt repayments at least a short while before you want to apply for a personal loan if you plan to take advantage of this strategy. The impact to your credit score will take a little while to process, as the lender you pay must report the payment and corresponding change in debt to the credit scoring agency.

Maintain a Side Job Before and After Applying

Part of the short-term personal loan application will ask for your income, and how much you make can influence how much you're able to borrow.

The amount of income that you claim to earn must be accurate on your application, but it doesn't need to be limited to just one job. Any work that you do for a regular paycheck can be counted, which means you can increase your reported income by getting a side hustle.

A second (or third) job is a classic side hustle, but sometimes people have trouble balancing the schedules of multiple traditional jobs. If you aren't able to get a traditional second job, you can instead turn to gig work. In 2017, the average monthly earnings of gig workers was $828 per month - which is enough to make a significant impact on your monthly income.

Unlike paying down debt, you don't have to wait for a period after you find a side hustle to apply for a short-term personal loan. As soon as you have another source of income, you can list it on your loan application and include however much you'll make from the work. Of course, you'll want to maintain any side hustle that you list so you can use the extra income to pay back the loan.

Talk With a Cosigner While Applying

If you take the two aforementioned steps and still think your short-term loan application needs a boost, see whether you can find someone to cosign with you.

A cosigner is someone who agrees to pay your loan if you fail to make the necessary payments, and the lender will consider the credit score of anyone who cosigns for you when you apply. If they have a good credit score, that can significantly help your application.

Most often, people have family members or close friends cosign when they need someone to.