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Ways to Improve Your Borrowing Power

February 12, 2019 · 4 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Ways to Improve Your Borrowing Power

Life has a knack for throwing expensive surprises our way.

Some are good. (An opportunity to go to France? Mais oui!) Some are not. (Two thousand dollars for an emergency root canal and crown? Downright painful.)

In a perfect world, you’d have your rainy-day fund at the ready, no matter what crazy costs might pop up. But if you don’t, and you need a chunk of money to book that trip or fix that tooth — or repair your car, or renovate your bathroom – an unsecured personal loan could be your best solution.

After all, you’ll probably need to get your hands on that money as quickly, easily and affordably as possible, with a payment plan that fits into your budget. And the right personal loan can offer all that.

That’s why it’s important to increase your borrowing power — your ability to qualify for the amount of money you need with the best interest rate you can get and a loan term and payments you can manage.

Here are five ways to potentially improve your borrowing power:

Cleaning up Your Credit Record

If you want lenders to love you, you have to prove you can pay back your debts. Companies that offer personal loans want to know you’re capable of paying back their money, so they’ll be looking at things like your credit score and your credit reports .

These things tell them about your financial obligations vs. what you earn every month, and it gives them a picture of your credit history. Your credit score isn’t all they may look into. For example, if you have a high debt-to-income ratio, you may be turned down for a loan—or, if you are approved, the terms may not be as user-friendly as you’d hoped.

You have a right to access your credit report once a year for free from each of the three major credit reporting bureaus: Experian, Equifax, and TransUnion. If you pull your report and see something that’s correct but might be off-putting to potential lenders—maybe an old bill from a cell phone you had in college and forgot all about—you can get to work on repairing the situation.

Evaluating Your Employment History and Earnings

Lenders also typically look at your gross income, and they could even consider your potential earnings and/or work history. Stability is usually important: Employees with a full-time job may seem less risky than a part-time or freelance worker whose hours and income might change from month to month.

On the other hand, if you are new to a job—fresh out of college or back to work after having kids, for example—and your current or potential earnings are substantial, you may look great despite the fact that your earnings are relatively new. If you’re due for a promotion or raise, you may want to ask about that income boost before applying for your new loan.

Considering a Co-Borrower

If you aren’t the ideal candidate for a personal loan, don’t abandon all hope. You may be able to use a co-borrower on your loan. This person could be a creditworthy family member or friend who is willing to apply for the loan with you. And remember, a co-borrower is different from a cosigner.

While a cosigner promises to pay the loan back in the event that you cannot, a co-borrower is more involved, as they are an equal borrower and jointly share the responsibility of paying back the loan with you.

The idea is to supplement your limited or less-than-optimal credit history with one that is better or longer-established. Having a joint borrower can make the difference between being approved or rejected, and also may result in more favorable terms.

Keep in mind that some lenders have stricter criteria for co-borrowers than individuals, so be aware of the loan requirements and your co-borrower’s financial state before applying for a personal loan. And not every lender accepts applications from co-borrowers, so if you think it’s a must for you, you’ll be limited to lenders who welcome co-borrowers.

If you’re the one who wants the loan, the idea of having someone bolster your chances probably sounds pretty terrific. If you manage the loan payments responsibly, you could also improve your credit status for future endeavors.

But keep in mind your co-borrower is now just as responsible for paying back the loan as you are. If you fail to make payments on your loan, the burden falls to him or her. If it’s a spouse, parent or partner, you may be able to work something out, but you might want to proceed with caution if, for example, your co-borrower is a friend or sibling. (With a SoFi personal loan, the co-borrower must live at the same address as the primary applicant.)

Being a Smart Borrower

Another way to improve your borrowing power is to know your way around a loan agreement. As with any financial product, understanding the fine print before you sign your contract is key. Hidden costs can sneak up on you. For example, some lenders charge a loan origination fee or a prepayment penalty, unlike SoFi, where personal loans are 100% fee-free. There are no origination fees or prepayment penalties either with SoFi.

Keeping your Options Open

If you need money now, the temptation may be to run to the nearest bank for a loan. But that’s not necessarily going to get you your loan any faster, and you may be missing out on competitive terms, innovative benefits, and solid customer service some online lenders have to offer.

For instance, besides the advantages listed above (accepting a co-borrower, no fees, unemployment protection), SoFi provides access to career services, networking events, additional-loan discounts, an autopay interest rate reduction, and more. And SoFi has built a reputation for great customer service; you can get answers to your questions at any time on any day of the week.

See How a Personal Loan Can Help

If your rainy-day fund is looking a little leaky these days, you can still take care of unexpected expenses. A low-interest SoFi personal loan could be the solution you need to keep your finances on track no matter what life throws your way.

Check out a SoFi personal loan when you need a little help dealing with life’s surprises. It only takes two minutes to apply!


Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the
FTC’s website on credit.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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