Personal Loans and Tips for Getting One
If you plan to borrow money to address a financial need, you might look into applying for a personal loan. To get this kind of loan, there will usually be no collateral needed. But certainly, there are other points you should take into account before applying for one.
A strong credit score means it will be easier to qualify for a personal loan and getting a lower interest rate. If you’re not very confident about yours, take measures to improve it, and then submit an application. The two most important steps you can take are making on-time payments and spending below your credit limits. Request a free credit report as well and review it, making sure any errors are disputed.
Pre-qualifying for a loan offers you a glimpse of the offers you will likely receive. A lot of online lenders will do a soft credit check during prequalification, which will have no effect on your credit score, so take advantage of it early on. During prequalification, you will be required to give the lender some essential personal information, such as your Social Security number, source of income, employer or business background, etc.
Terms and Conditions
As you will find with any other type of financing, there are terms and conditions attached to personal loans. Specifically, you’d like to watch out for a surprise APR (this should be the full cost of your loan, no additions), prepayment penalties, and automatic withdrawals (avoiding overdraft fees can be as simple as setting up a low balance alert on your checking account). Also make sure that the lender reports payments to credit bureaus, pays directly to creditors if you’re consolidating debt, and has generally flexible payment features.
Submitting an Application
Once you have compared a number of loan providers, you can pick one that is most suitable to your needs and preferences. The key requirements you will be asked for include proof of income (bank statements, W-2 forms, etc.), identification (state ID, driver’s license, etc.) and verification of address (lease contract, utility bill, etc.). The lender will also do a hard credit check, which will affect your credit scores a bit. Provided all needed documentation is in place and you actually meet the bank’s or lender’s requirements, the funds will likely be forwarded to your account in a week’s time.
Though a personal loan can surely help you survive a financial difficulty, it is important to explore and study your options before picking one. Hunt for the best rates, don’t borrow more than you actually need, and be conscientious when making your payments. And finally, make comparisons in order to find the best.