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The 60-Day Rule: Applying for Personal Loans and Where to Focus

Too often, a financial consumer will rush into a personal loan application, and not be fully prepared to meet the requirements needed that lead to a lender’s approval.

That’s not a savvy financial move, as studies show that borrowers who aren’t prepared to apply for a personal loan can wind up getting rejected.

Don’t let that happen to you.

By adopting a “60-days-out” mindset where you lay the groundwork for a loan approval well ahead of application time, your odds of getting that green light rise significantly.

Take these three action steps to prepare for your personal loan campaign, and leave plenty of time for the financial seeds you’ve planted to yield good results.

Check your credit health

Most personal loans are approved with borrowers with good credit – a FICO credit score of 700-or-over will usually get the job done. If your credit score isn’t at that level, you need to address the problem.

“You can check your credit history for free at,” says Mark Kantrowitz, publisher at “Normally you get one free report from each credit bureau per 12-month period. During the pandemic, however, you can check weekly through April 30, 2021.)”

If bad information on your credit report is holding you back, you can correct inaccuracies by disputing them.

“The creditor has 30 days to confirm or remove the inaccurate information,” Kantrowitz says. “So, you should wait at least 30 days after your dispute the information to have the corrections reflected in your credit score.”

Focus on debt-to-income

An overflow of debt is another big reason why borrowers are turned down for a personal loan. Thus, taking a sharp view on debt reduction is another long-term way to smooth the way for a personal loan approval.

“Pay down your existing debt in order to improve your credit score, thereby increasing the chances of the loan approval,” says Carol Tompkins, business development content at AccountsPortal, and online finance and accounting advisory platform. “Ensure you are making minimum payments on your current loans on time each month, and keep your utilization rate low.”

Tompkins advises borrowers to determine their personal debt to income ratio (the amount of personal debt versus household income), and see to it that you have the income to repay the loan if approved. “A high debt to income ratio might make you seem riskier to lenders, so you need to spend some time ensuring that you are not spending more than 40% of your income to pay off debts, before applying for the personal loan,” she says.

Basically, the goal is to pay down existing debt to improve your credit score, and bring income to debt ratio lower in order to increase the chances of your personal loan being approved. “Spend at least two months addressing debt to increase the chances of the loan approval,” Thompkins added.

Pay down credit cards. The number one household debt vehicle that impacts a personal loan approval is credit card debt.

“A recent report from the Federal Reserve found that Americans have roughly $1.08 trillion in revolving debt – credit cards included,” says Galit Tsadik, money expert and Founder of FINancialSharktress, a personal financial website. “Paying back your credit card debt isn’t nearly as easy as getting into it, but there are reliable strategies for paying down your debt. All you need is a solid plan, some dedication and discipline so that you can successfully work toward freeing your mind of financial stress once and for all.

Job one with credit card paydowns is to figure out how much debt is outstanding.

“Do this by making a list of all your credit cards, their interest rates, balance and minimum payments,” Tsadik says. “Now ask yourself, how important are quick repayment wins to your motivation? Be honest with yourself. It’s okay to need a quick win to keep you going strong.”

Once you’ve evaluated credit card debt repayment options, you have two options:

Option 1: Get the best bang for your buck and use the debt avalanche method.
Sort your credit cards from highest interest rate to lowest interest rate and pay off the high interest rate cards first. “To do this, pay the minimum payments on all of your cards and any extra money you have should go towards paying off the highest interest card,” she says. “Once you’ve paid that off, move down the list and focus on paying off the next highest interest rate card. Keep going until you are debt free.”

Option 2: Celebrate quicker wins to keep you motivated by using the debt snowball method.
“Sort your credit cards from smallest balance to largest balance, regardless of interest rates, and pay off the card with the smallest balance first,” Tsadik adds. “To do this, pay the minimum payments on all of your cards and any extra money you have should go towards paying off the card with the smallest balance. Once you’ve paid that off, move down the list and focus on paying off the next smallest balance card. Once again, keep going until you are debt free.”

The 60 Day Countdown

If you can improve your credit score, get a grip on your debt-to-income, and pay down your credit card debt – and take eight weeks or more to make sure the job gets done, you can set the stage for personal loan approval.

Given the high stakes involved, it’s time well spent.

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Brian O'Connell
Brian O’Connell

Brian O'Connell has been a finance writer at TheStreet, TheBalance, LendingTree, CBS, CNBC, WSJ, US News and others, where he shares his expertise in personal finance, credit and debt. A published author and former trader, his byline has appeared in dozens of top-tier national publications.

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2020-10-22T10:42:54-07:00September 1st, 2020|Personal Loans|
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