Owing to the popular trend of online trending, personal loans seems to have made a comeback over the last few years. Millennials rely on personal loans a lot to finance major expenses or consolidate debt. Personal loans for students have also jumped in recent years.
Understanding the process of applying for the loan and all the requirements helps in deciding on the right type of loan.
Here is a step-by-step guide for getting personal loans:
1. Deciding the amount
Finding the right loan and the best personal loan lender begins with how much you can afford to repay. What are your current needs? You can take help from a personal loan calculator as well and know how to stay within limits. Also, you would have to ensure that you can afford and pay the personal loan monthly payments on time. You should know how long it is going to take you to repay it also.
2. Selecting the loan type
There are different kinds of loans available to meet your different needs. Applying for a loan that directly matches your needs could boost the chances of approved. Personal loans are the most common type of loan and you can take it to meet an emergency, finance studies, go on a vacation, or plan a wedding.
Also, there are a few factors you need to bear in mind such as:
Should you get a secured loan or an unsecured loan? You need to put up collateral (home, jewelry, or vehicle) for secured loans. If you fail to repay it, your lender could take anything you used as collateral and resell it.
The second thing to note is the interest rate. You have options for a fixed or variable rate. Loans with fixed-rate have the same rate throughout the term of the loan, whereas, the variable rate keeps on changing. However, with a fixed-rate loan, your monthly repayments can never change.
Assess your Credit score
To know whether you can qualify for the best personal loan lender’s loan and interest rates, you need to check your credit score. With a good credit score, you can get a lower APR for a secured personal loan. But with bad credit, you would have to get a cosigner to sign the agreement with you to qualify the loan. Also, the likeliness of getting a good APR is much less.
There are many sites from where you can check your credit score.
4. Look at the offers from the lenders
All the best personal loan lenders have different loan types. Banks offer a wide range of personal loans as well as credit card products. But they don’t have a remedy for you if you have a terrible credit score.
5. Ask about eligibility requirements and APR
This is crucial before you apply for a personal loan. The best personal loan lenders list down the eligibility criteria for your information so you can meet these requirements before applying for a loan. Lenders sometimes even list an APR range you could fill on line.
Some lenders allow you to get the rate estimate without impacting your credit score. It is crucial to know your credit score and know the APR you require to apply for a loan.
6. Compare your alternatives
To find the best personal loan for yourself, you have to know what you want and then compare all the options. Know how much the best personal loan lender is charging for fees and then compare it to other similar loans.
Also, compare the additional offers that lenders make. Know the eligibility criteria of loans and the APR offered to you.
7. Collect the necessary information
It depends on your loan lender what kind of information they require from you. You would need an identity card, prove your address, provide verification, and other income sources if you have any. To get a secured loan, you will need some extra documents about the collateral.
When you apply for a loan, you should have your driver’s license, bank statements, and your recent tax documents.
8. Fill out and submit the application form
After deciding which loan to get, it is time to apply for the loan. The best personal loan lenders allow you to have a convenient online application, but you can apply over the phone or by visiting the office. The time for approval and getting the loan proceeds varies and fluctuates from a few hours to a few weeks.