A 10-Point Plan for Loans (Without Being Overwhelmed)

How to Get a Personal Loan

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.

Credit Score

A strong credit score will increase your chances of getting a personal loan and a lower interest rate. If yours is hardly impressive, work on it before submitting an application. Start by making payments on time and avoiding maxing your cards. Also ask for a free credit report, review it and dispute any errors you might find.

Loan Prequalification

Pre-qualifying for a loan offers you a glimpse of the offers you will likely receive. Online lenders usually perform a soft credit check during prequalification (don’t worry, this won’t affect your credit score), so get it early on in the process. 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.

Fine Print

As you will find with any other type of financing, there are terms and conditions attached to personal loans. In particular, look out for prepayment penalties, a surprise APR (this figure should reflect the entire cost of your loan, meaning all costs included, and automatic withdrawals (to avoid overdraft fees, set up a low balance alert with your bank. 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 reviewing a few lenders and making comparisons, it’s time to pick the one that fits your needs most perfectly. Before you apply for a personal loan, be ready with a state-issued ID (Social Security card, driver’s license, etc.), address verification (copy of lease, utility bills, etc.), and evidence of income (pay stubs, tax returns, 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.

A personal loan can help you during financial difficulty, but make sure you review your options thoroughly before making a choice. Look for the lowest rates, borrow only money you need, and make on-time payments. And remember, make comparisons because this is the only way to know which option is best.

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