How to Guarantee You
Qualify for a Secured Loan

Improve your chances of getting a secured loan

Although the majority of people will qualify for a secured loan, there are some cases in which no amount of collateral will convince a lender to extend you credit. In order to avoid embarrassment and time loss, you want to have some knowledge about the things a lender seeks before approving any kind of loan.

Source and Amount of Disposable Income

Even with a secured loan the majority of lenders want to make sure a borrower has sufficient income to make payments on a secured loan. Even if your loan is secured by real estate, the preference of lenders, no lender is going to deliberately put himself into the position of having to foreclose on a borrower’s home. You have to provide proof to the lender that your income is sufficient to cover the loan payments together with any other debt payments you have.

The source of your income may be of importance to some lenders, especially if it appears to be a temporary source such as unemployment or temporary disability payments. Pensioners with a consistent income or those on permanent disability would not likely be of concern to lenders as long as the income is sufficient to make the payments on the loan in addition to other financial obligations.

Employment Stability

Employment stability is an important part of qualifying for a secured loan. It isn’t enough for you to have equity in your home or other sufficient collateral-you also need to prove you are going to have a steady source of income. Does that mean if you are retired you will not qualify for the loan? Retirees fall into a different category because they have already proven they can maintain long term employment, but they will need to be able to prove their retirement benefits are sufficient to sustain their lifestyle. However, for those still young enough to still be relying on employment they must prove their ability to maintain steady employment.

Credit Score and Credit History

Lenders are also interested in your credit score and credit history when you apply for a secured loan. Although your credit score shows the lender the risk factors, your credit history shows your payment history. While some lenders rely solely on the credit score, others look at both your credit score and your credit score. In a perfect world the two of them would work together as one, but there are too many factors that may not intermingle. For example, credit scoring reflects only your outstanding debt with no relation to your income. Thus if you know your credit score is not as high as it should be for a certain lender, make sure you choose one that takes into account your credit history and your credit score.

Most borrowers don’t have a clue how credit scoring works, and unfortunately the companies who do the scoring want to keep it that way. Even financial institutions don’t know completely how certain factors affect your credit score, so it’s essential for you to know both your score and your credit history in order to know how one ties in with the other. Make sure the lender is one that uses both of these factors before making a decision on any loan.

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