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There comes a time when you face tight financial situations or need to make a big purchase, forcing you to take out a loan. Not all lenders will give you the amount of loan you want. That’s because different lenders evaluate different things when assessing whether or not to grant you a loan and your borrowing power. Your borrowing power determines the amount of money you can get when taking out a loan.

This can make a significant difference when determining whether the loan you’re applying for can satisfy your needs. If you’re wondering how much can I get for a title loan? The truth is there is no single answer since it depends on many factors, including the value of your vehicle and the lender you choose.

It’s vital to evaluate how much you can borrow before going ahead with your loan application. If you’re looking to take out a loan, here are four crucial factors that can affect your borrowing power:

1.Your Income

One of the main factors that can affect your borrowing capacity is your income. That’s because your income is one of the main things lenders look at when determining the amount of money you can borrow. It also dictates your capacity to make repayments. If your income shows your repayment capacity to be high, your lender may qualify you for a bigger loan.

Also, some lenders may consider your type of employment when assessing your income, which can affect your borrowing capacity. For instance, some lenders may give you a smaller loan if you’re a casual employee than a permanent employee, even though you earn the same. That’s because casual workers usually have unpaid annual leaves and sick days, which could affect your income and repayment capacity. Besides your income, showing proof of regular savings in your loan application can improve your borrowing power.

2.Outstanding Debts and Living Expenses

Lenders also consider your living expenses and current debts when working out your borrowing capacity. Lenders look into these factors because any outstanding financial commitments you put your income towards could affect your repayment capacity. Assessing your living expenses and outstanding debts helps the lender ascertain you can make adequate and timely repayments while still maintaining your lifestyle.

Some expenses or debts can significantly reduce your borrowing capacity or even make your loan application to be declined. This includes credit card debt, ongoing financial commitments like school fees, debt-to-income ratio, and other outstanding debts you might have.

3.Your Credit History

Another factor that can impact your borrowing capacity when taking out a loan is your credit history. Good credit history can show lenders that you’re a reliable borrower who makes their payments on time, qualifying you for a larger loan. On the other hand, if your credit report shows you’ve missed several bills or made late payments in the past, it could significantly reduce your borrowing power. Some lenders may even reject your loan application since they consider you a high-risk borrower.

For that reason, it’s always advisable to check your credit report for mistakes and discrepancies and have them corrected before applying for a loan. Making timely payments and paying off any outstanding debts can also help improve your credit rating, allowing you to borrow a higher amount.

Endnote

The above-discussed factors can greatly impact your borrowing power when applying for a loan. The good thing is that knowing these factors can help you take the necessary steps to improve your borrowing capacity. The best way to boost your borrowing power is by cutting your expenses and increasing your income before applying for a loan. Fix any issues on your credit report and pay off your outstanding debts before lodging your loan application to maximize your borrowing capacity.