Due to all the bureaucracy and paperwork involved, applying for a personal loan may seem like a tedious affair. In reality, however, the process is quite simple and it can be completed in a matter of days. Follow these 5 easy steps outlined below to secure a personal loan today:
1. Decide On How Much You Want
Before applying for a loan, you have to decide just how much money you need to borrow. Consider the expense you want to use the loan to finance: a new car, your dream wedding, a house on the beach, etc. but while doing so, take your income into consideration.
You don’t want to request for an amount you’ll struggle to pay back and at the same time, you have to request for enough to meet your needs.
2. Check Your Credit Rating
Once you’ve decided on how much you need, the next step is to check your credit rating. Your credit rating decides which loans you’re eligible for and how much interest you are charged. A score of 700 and above will get you the best terms, scores between 650 and 699 are considered fair, but scores lower than 649 are not so good.
If your credit score is below 649, it may be smart to consider credit repair before applying for a loan. However, there are lenders that give out loans to individuals with low scores, so all hope is not lost.
3. Conduct Your Research and Compare Offers
Having decided on how much money you need/can afford to borrow, and armed with your credit score rating, you can now shop for offers and pick the one that best suits your needs.
Talk to a loan professional and discuss the options that are available to you. Factors to consider are interest rates (the lower the better), loan terms (if you want a short-term loan, find out which lenders offer the best short-term loan rates), and repayment terms (some lenders allow multiple repayments without penalty, some don’t).
4. Prepare The Required Documents
To apply for a personal loan, all borrowers need to submit documents. In order to shorten approval time, it is advisable to have all the documents in-hand before applying. Required documents include a means of identity verification (a driver’s license or a passport), proof of residence (a lease agreement, utility bills, or mortgage statements), and proof of income (W-2s or bank statements). Self-employed people may be asked to provide their business registration certificates.
Please note that this list is not exhaustive and some lenders may ask for documents not stated above.
5. Apply For The Personal Loan
Now that you know how much you need, what your credit rating is, which banks/lending houses offer terms that most suits your needs, and you have the general documents you require, the next step is to apply for the loan. This may be done physically at the lender’s office or over the internet. How quickly your loan is approved depends on the lender and other factors. It may be approved in hours, and in some cases, it may take weeks.
Once you’ve secured the loan, use a repayment calculator to determine how much you need to pay every month. Stick to the schedule in order to avoid paying extra in default fees; defaulting also affects your credit score adversely. If your finances improve over the years and you have an opportunity to pay out your loans earlier than anticipated, please do. You will be saving yourself a chunk in interest fees.