There are a variety of loans that are available to suit the needs of someone who may be trying to consolidate their debts, take their dream vacation, pay for school, to name just a few of the common life-scenarios that prompt people to try to be approved for a loan. In order to be prepared before you begin the process, you should be aware of the minimum borrower requirements for any loan:
Minimum Age
With few exceptions, the minimum age that is required for a person to be approved for a loan is 18 years old. There are only four states who have an exception to this rule which are Alabama, Mississippi, Nebraska, and Puerto Rico where the potential borrower needs to be older and be minimally between the ages of 19-21 years old, depending on which of these states you live in. Anyone who is younger than 18 years old would need a cosigner before they can be considered.
Residency Status
Any bank or lending establishment will verify your residency status in the United States or any country in which you are seeking a loan. You must be able to provide proof that you have resided continuously in the country for at least six months before applying for a loan. This is the case for virtually any loan available to consumers, from fast cash personal loans online to 15-year mortgages. Lenders like to see signs of stability and predictability in their borrowers’ lives and residency status provides a strong indicator.
Employment History
The longer you have been at your employer, the more likely that a lender will consider you a good risk for loan repayment and strengthen your chances of being approved for a loan. Typically, a lender looks most favorably on someone who can minimally prove two years of employment at the same job. If you work for yourself, you will need to show proof of this through business account bank statements that go back at least 2-3 years. Individuals who have long-term employment and are paid solely on a commission that varies from month-to-month also need to prove that they have a consistent amount of money coming in each month to cover a premium loan monthly payment to the lender.
Debt-to-Income Ratio
With few exceptions, lenders look at how much money you make each month and compare it to your monthly debt amount. This is called the debt-to-income ratio and it usually cannot exceed 35% of your gross monthly income. The average lender will consider a loan if an individual has at least $800-$1,000 of additional monthly income beyond your debt in order to comfortably pay a loan premium each month.
Other Types of Loan Requirements
Mortgage Down Payment
Even though this may not be a steadfast requirement for all mortgage lenders, it is to your advantage to be able to offer between a 5 percent to 20 percent down payment on the chosen property before the loan process begins. This improves the lender score you are given for loan approval since it lessens the ratio of debt that you will incur when you become the owner of the property.
Personal Loan Collateral
This is not always a requirement for personal loans since people do not have the same items on hand for collateral value to offer, but there are personal loan lenders who require some kind of collateral before you are approved for a personal loan because a credit score may not be the most favorable for their minimum requirements. Types of collateral could include a vehicle, property, or cash.
