What Qualifications Do You Need for Loans?
An emergency expense has cropped up, and you don’t have enough savings stashed in your emergency fund to cover it. What can you do?
Well, one of your options is to apply for a loan and see whether you get approved for it. You don’t even have to go to the bank to achieve this — you can apply for a loan with your phone or with your home computer. It’s that simple.
But, before you fill out a personal loan application, you will need to make sure you meet all of the qualifications first. What qualifications do you need? These are common qualifications you can expect to encounter.
One qualification that you can expect when applying for a loan is age. You will have to be the legal contract age in your state of residence. The legal contract age will be the same as the state’s age of majority (the age that citizens are no longer considered to be minors). In most states, this is 18 years old.
These are some exceptions to this rule:
- Alabama’s age of majority is 19 years old
- Nebraska’s age of majority is 19 years old
- Mississippi’s age of majority is 21 years old
You will have to be a legal U.S. citizen to apply for a loan. If you don’t have full citizenship, you should at least have a permanent resident card (commonly known as a Green Card).
Not all loans will be accessible in your state of residence. So, when you’re looking into loan options online, you should check to see where it’s accessible and where it isn’t. You don’t want to waste your time filling out an application for a loan that isn’t even available to you.
Browse the servicer’s home website and check the FAQ page to find this basic information.
You will need a regular source of income in order to apply for a loan. Providers will want proof that you can repay the funds that you borrowed on a steady basis. Without a regular source of income, you may be unable to keep up with the billing cycle and default on repayments.
Another qualification is an active bank account. If you get approved for a loan, you will have to access the borrowed funds through your bank account, which you can spend or withdraw from your account at your discretion.
If you don’t have an active bank account, you’re not alone. A surprising number of Americans are also unbanked — this means not having an active checking or savings account with a bank or credit union. According to a household survey from the Federal Deposit Insurance Corporation, an estimated 5.4% of U.S. households were unbanked in 2019.
If you are unbanked or underbanked, you should try to resolve that issue before you look into borrowing options.
Your credit score can impact your loan eligibility. Why? Your credit score is a thorough assessment of your credit experience, showing what type of borrower you are. This is helpful information for financial institutions. They can look at your score to determine whether you’re a high-risk or low-risk borrower.
A high-risk borrower is someone who is more likely to take on too much credit debt and default on repayments. If a financial institution sees that you’re a high-risk borrower, they may compensate for that risk by offering a smaller loan amount. In some cases, they may not approve your application.
Do you think you meet all of the qualifications? Then, you might be ready to fill out that application.