Personal Loans and Tips for Getting One
If you’re planning to borrow money to consolidate credit card debt, move to a new home, or meet any financial need, a personal loan can be a good option. 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 will increase your chances of getting a personal loan and 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. You’ll also want to request a free credit report, review it, and get errors fixed, if any.
Through loan prequalification, you can see what what potential offers you might get. 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. At prequalification, you will be required to supply some basic information such as your income source, employer background, Social Security number, and so on.
Terms and Conditions
As with any other type of financing, a personal loan has terms and conditions tied to it. 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
After comparing a few loan providers, you should be able to choose one that best aligns with your needs and preferences. Basic requirements you need to prepare are state-issued identification (driver’s license, passport, etc.), proof of address (utility bills), and proof of income (W-2 forms, bank statements, tax returns or pay stubs). The lender will run a hard credit check too, and you should know that this will have an impact on your credit scores. With all your paperwork in perfect order and assuming you meet all the requirements of the loan provider, you will probably receive the funds in your bank account within a week.
While a personal loan can certainly help you in a financial need, you need to go over your options carefully before settling on one. Hunt for the best rates, don’t borrow more than you actually need, and be conscientious when making your payments. And remember, make comparisons because this is the only way to know which option is best.