Atlantic Blog

There's only so much planning ahead you can do. You can create an Emergency Fund. You can run an airtight budget that helps you set aside monthly savings, but life is unpredictable. Recently, I ran into car trouble, and it's a lot harder to make it to the office when your vehicle is rattling every time you stop at a stop sign. I sent my wheels off to the mechanic and, fearing the worst, started car shopping, and while the prices attached to a new vehicle did make my eyes pop out of my head like a cartoon character - I also started considering an auto loan.

If you find applying for a loan daunting - you're not alone, but there's nothing to fear! There are actionable steps you can take to improve your chances for approval. Whether you're looking to finance a new car, buy a home, consolidate debt, pay for education expenses, or borrow for another need, preparing your finances beforehand can make all the difference.

I got lucky, and my car will live to fight another day - but while I considered loans, I brainstormed important tips to keep in mind before I applied; maybe they can help you boost your approval odds!

How Much Can You Afford?

You don’t need to bust out a piece of paper and pencil and start doing long math – but knowing how much you can afford each month will make a huge difference in determining if you can handle another loan in your finances. The last thing you want to do is get approved for a loan that causes you undue stress or harms your finances.

Know how much you can borrow before you apply! Financial calculators are a great starting point. You can use these tools to estimate monthly payments based on the loan amount, interest rate, and loan term. Then, you can adjust the different variables to fine-tune your loan and obtain a realistic monthly payment that works with your budget and doesn't put other financial obligations at risk.

A down payment can improve your odds, but how much can you afford? For example, Atlantic often looks for a 10%- 20% down payment on vehicle loans. If you can determine how much you need to save and how much is feasible on your budget, you should set it aside each month.

What’s my Score?

Credit scores can sometimes feel overwhelming, especially given their importance in the loan approval process, but the criteria for boosting your score is actually pretty simple! Lenders evaluate your score to assess your creditworthiness and likelihood of repaying the loan, and the higher your credit score, the higher your chance of approval.

So, what can you do to boost your score?

• Always pay your bills on time. Late payments can drastically ding your credit score, especially if it’s a common occurrence. Try setting reminders in your calendar or set up automatic payments to make sure you never miss a payment.
• Reduce your rate of debt. A high debt utilization can flag you as volatile when applying for more potential borrowing power. Try to pay down your credit cards before applying, do balance transfers, or consider reprioritizing your loan goals and apply for a debt consolidation loan instead! Lowering your debts boosts your score and improves your approval odds.
• Set a credit goal for yourself! You can utilize SavvyMoney in Atlantic’s Digital Banking to set a credit score goal for yourself or check how your score is doing. Setting a credit score goal and checking out the tips SavvyMoney provides gives you a tangible endpoint to strive for, and once you do, you can reward yourself by applying for your loan!
• “Don't wait until you need a loan to start preparing for a loan. We offer credit building products like credit builder loans to get you started today to help ensure you are ready when the time comes. Bonus -- you can even use the funds from the credit builder loan towards a down payment.” – Leya Consumer Loan Manager
• Limit New Credit Applications. Every time you apply for credit, there’s a hard inquiry on your credit report, which can temporarily ding your score. Only apply for new credit when necessary to preserve your score.

It’s also important to remember that your credit score won’t drastically change overnight; it’s a long-term process that requires due diligence and patience!

Who Can Cosign?

If you’re young, you might not have much credit yet, and your credit score will reflect the lack of history or debt by being lower. Maybe you need a car to get to and from college, but you can’t secure a loan alone. It might be time to bring in a co-signer, like your parents, to help approve a loan.

A co-signer can help you secure your loan, but there are things you need to keep in mind. The person signing is putting themselves at risk for the loan alongside you. If you miss a payment or can’t afford the loan, it will negatively impact their credit scores and finances. So make sure that if you’re asking someone to cosign a loan with you that, you’re absolutely certain you can handle the financial burden.

How to Secure More Favorable Loan Terms

Applying and being approved for the loan you need is only half the equation. You also want to ensure that the loan terms are favorable and fit nicely within your budget. Individuals worried about their loan approval odds often try to obtain financing at the last minute.

To secure more favorable loan terms, consider these tips:

Compare Rates & Terms: Not all lenders are the same. Even with excellent credit, the loan rates, fees, and terms can vary significantly from one lender to another. Instead, do your research beforehand. For instance, we're a not-for-profit financial institution. That means that our loan rates and terms are often some of the lowest in town, and we're more willing to work with you to meet your needs than other financial institutions might be.

Obtain Pre-Approval: Never wait until the last step of a monumental purchase to secure funding. It can cause you to be forced to terms that negatively impact your financial standing. No one wants to be stuck with unfavorable terms or costly monthly payments, so plan ahead!

Pre-approval is the process of applying for your loan ahead of time with the credit union. Our team will work with you one-on-one, review your financials, and approve you for a loan that fits within your budget.

We’re Here to Help!

Improving your loan approval odds requires a combination of healthy financial habits, careful planning and budgeting, and strategic use of the resources available to you. By incorporating all of these, you can enhance your likelihood of securing a loan that meets your needs.

If you’d like to learn more about the loan pre-approval process and how we can help you secure a loan, we’re here to help. We offer a variety of loan options for all your borrowing needs. Please stop by any of our convenient branch locations or call us at 800-834-0432 to speak with a team member today.

Stay up to date and join our email list.

The Atlantic blog strives to deliver informative, relevant, and sometimes fun financial information. If you enjoyed this article, please forward it to a friend.

Each individual’s financial situation is unique, and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.