Blog

7 Things Lenders Look at When Giving You an Online Loan

By Jason Ramin

When a lender gives you a loan, they’re taking a risk. You may not be able to pay them back. How are they supposed to know for sure? Years before, people borrowed money with only their word that they’d pay it back. Our world operates on loans and lines of credit today, something that entails a bit more than just your word.

Lenders in our day and age have developed a way to predict a person’s ability to pay back a loan. It’s a process that involves potential borrowers meeting certain criteria, as well as a detailed analysis of other factors that will help lenders determine loan eligibility.

When it comes to online loan lenders, there are certain things you as a borrower should be aware of—things lenders are going to search for and look at and expect from you that will help them decide if you will qualify for a loan from them or not. Keep reading to learn more about online loans and some of the common requirements online loan lenders have.

What Are Online Loans?

Online loans are a form of personal loan. They can range anywhere from $1k to $35k, but the amount you qualify for will depend on your personal borrowing history, the state’s regulations, and other factors. Keep reading to learn more about the other factors that play into whether or not you qualify for online loans.

Criteria For Online Loan Lenders

Your credit score, your current income level and expenses, your employment history: these are just a few of the things lenders look at to determine whether or not to give you an online loan.

Credit score

You’ll want a strong, high credit score if you’re looking to qualify for an online loan. Lenders like to see consistent, steady rates of paying your bills on time and paying off your debt.

Current Income

What’s your current level of income? The amount you make in a given month will go a long way to helping creditors decide if you qualify for online loans.

Debt to Income Ratio

Going hand-in-hand with your income is how much you spend each month. Lenders like to see borrowers with lower numbers on their monthly debt ratio. If you keep your expenses down below 50%, you’re doing great. The lower that percentage, the better. Someone with a high debt-to-income ratio will worry lenders, whose main concern would be that the person in question won’t be able to pay back the loan.

Available Collateral

Depending on how much money you want, the big-ticket items you own will help online loan lenders determine what they will give you. If you put up your boat or house or car as collateral for a loan, lenders will be more likely to give you the money you want because they’ll be guaranteed some returning income if you don’t successfully pay them back in time.

Employment History

Lenders like to see people with a good employment record. It demonstrates that they are able to keep a job and work to earn money. The longer you’ve kept a job, the more likely it is that your source of income won’t disappear, meaning the lenders will get back the money you owe them.

Equated Monthly Installment

This is a number you and your lender will figure out. Once you’ve set a due date for all payments to be made, you will need to calculate how much is due each month. If you can’t make the set monthly payments to pay back the loan, a lender will be unlikely to give it to you in the first place.

Repayment History

Do you make your regular bill and other loan payments on time? If so, that’s a good indication to an online money lender that you’ll pay them back as well.

Loan Eligibility with Personal Loans

Learn more about how online personal loans work, how you can better qualify for one, and where you can get a loan that can work for your situation!