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Personal Loans: What’s The Process

There are many types of loans out there, but one of the most popular loan types is personal loans. This is part and parcel thanks to the variety of uses they have.

However, personal loans still need an application and have a strict process per lender for you to go through before you actually get the loan. No matter whether you are looking to get a personal loan in Florida, California, New Jersey, Virginia, or whatever.

While lenders all have different requirements and are unique, they will have the same sort of process.

 

Getting A Personal Loan

 

Looking around for a personal loan does not actually need to be complicated, even if it does seem to be complicated at first. You need to know where to begin and have a good understanding of how you need to compare the various offers.

The biggest factor you need to consider is your selection. While you need to consider your credit score and other application factors, ensuring that you choose the right personal loan for you is a hugely important part of the process.

Let’s now talk you through the six steps that will help to guide you through the process of applying for a personal loan.

 

Look Over Your Credit Score

 

If you have high credit then you will have a higher chance of success at getting the loan that you want, and you will also be more likely to get a more ideal and decreased interest rate.

You want to check over your credit score before you apply for the loan, assessing your overall creditworthiness will help you to get an idea of the likelihood of you getting a good loan, or to get a low-interest rate.

 

Credit scores will fall into the following categories:

  • 720 or above signifies excellent credit.
  • 690 to 719 signifies good credit.
  • 630 to 389 is for fair or average credit.
  • 300- 629 signifies that you have bad credit.

If you have a credit score that is less than ideal, you should try to fix up any problems that could be making it low. You can also ask to have a free credit report, and therefore dispute any potentially wrong reports on faulted payments or any other potential inaccuracies that it could hold.

You should also make sure that you make plenty of payments on time towards any loans or credit cards, this is important to maintain your credit utilization low as this is one of the most important factors that will affect your credit score.

 

Compare Different Rate Estimations

 

Being aware of what your credit score looks like can provide you with a brilliant idea about the APR you should expect for your personal loan.

A good idea is to get a loan payment calculator to look at what you will likely get, instead of just waiting to see what you do get offered. This will also give you a good idea of what you should be working towards getting from a lender.

 

Get A Pre-Qualification For A Loan

 

Pre-qualifying for a loan can then give you a better idea and can give you an idea of what offers you may receive may look like.

Online lenders and banks can complete a soft credit check when they do this, which will not damage your credit score.

Around this time you will need to provide some personal information such as your date of birth, name, income and purpose of the loan.

If you pre-qualify for several lenders, it can help you to better compare the rate estimations and amounts you will have to pay.

While you could miss this step, you want to do this as it will better give you an idea of what to expect when you do qualify for a loan.

 

Compare Different Lenders & Have A Look Around

 

Now that you do have the loan amounts and an idea of what you will be getting you want to compare the amounts of the loan you want, the monthly payment amounts, and the interest rates that you pre-qualified for. Using a variety of online lenders, and shopping around will give you a wider range to choose from.

Some lenders may give you lower loan payments but a higher interest rate, with others you could have a higher loan payment but a low-interest rate. Some may also have all these factors higher, whereas others will be lower.

Credit unions will often provide lower APR and more flexible terms, which is more likely if you have bad credit, and they are best for smaller loans, such as loans below $2,500.

Some bigger financial institutions such as Discover can also provide unsecured personal loans, which are the general preference.

 

Always, ALWAYS Read The Fine Print

 

Before you go signing your life away applying for a loan, always read the Ts & Cs and get answers to all the questions that you have.

You should watch out for fees, such as prepayment penalties, which are a fee for paying off the loan early. This is rare, but some will charge this fee or other fees such as origination and late payment.

You can get automatic withdrawals. So if a lender automatically withdraws loan payments from your account you should set up a low balance alert notification, so you can avoid dipping into your overdraft.

Also, check for APR surprises, and check the total loan cost.

 

Complete The Application & Await Approval

 

When you have done all this you need to apply for the loan. This will usually require ID, address verification, and proof of income.

You need to provide these for your application and then wait to see if you have been approved.

Lenders will run a hard credit check on you, which will lower your credit score by a few points, and will show up on any of your credit reports for 24 months after.

Once you have been approved you will get your funds in accordance with the terms of the lender, however, this is usually within the time of a week.

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