Have you ever taken a loan? Yes, many people rely on loans to make purchases. People usually take loans to buy a car or a house. Taking a loan will provide you with additional financial help to realize your financial goals.
But the problem is that if you want money for other situations such as home repairs, car repairs or any health-related operations. So in such a case, you can get a personal loan. With personal loans, you can take care of any unexpected expenses that come your way. Always remember that unexpected expenses come unannounced.
So when you have outstanding credit balances it is better to take a personal loan. You can pay off your debts in one single payment and later you can repay your loan slowly. In a personal loan, the lender will lend you a lump sum money at a fixed rate. As you will be paying money in installments so it will not become a burden to a wallet. Also frankly, taking a personal loan is cheaper than using a credit card too.
Whenever you have outstanding payments to make, paying them through credit cards is not a good choice as you see the interest rates are pretty high. So paying using a personal loan is truly good and your finances will be in profit too.
This brings us to how to get a personal loan. Are you curious? Then stick till the end to find out.
Steps to get a personal loan
Getting a personal loan is simply quite a straightforward process. These are simple steps that you must follow.
Secured or Unsecured
The first and foremost step you must decide about is whether you want the loan to be secured or unsecured. For a secured loan you must give your property as collateral. If you default on paying up your loan then the lender has the right to take your property. However, on an unsecured loan, you don’t have to put anything to collateral and the application process is also quite fast. It is difficult to qualify for this type of loan. Your credit score should be seriously good to qualify. The interest rate for secured loans is low and that is the reason they take collateral from you.
Credit score
Before giving you a loan they will check your credit history or credit score. So your credit score should always be good. Because if that is not the case then you will face difficulties in getting a loan. Your credit score shows your creditworthiness. Simply put, it will show the lender whether you pay your loans timely or not or if you have defaulted previously to make a payment. If your credit score is bad, no lender will be daring enough to give a loan as there is no certainty that you will pay them back, especially in the case of an unsecured loan.
So keep an eye on your credit score and check it once every three to six months to find out if there are any errors. If there are, you can contact the credit bureau to correct them. Major credit bureaus offer you free credit reports. So you can go to the websites of Equifax, TransUnion or Experian to get your credit report. Also on your end never delay in paying your debts off because it will seriously have a bad effect on your credit score.
Interest rates
No two lenders have the same interest rates. So look for all the interest rates of different lenders from banks to online-only lenders. Don’t just go for the first interest rate that looks low. As you’re not someone who frequently takes a loan or gives one you may not have adequate information relating to the interest rates. So gather all the information possible and then compare the rates. Because if you just blindly select a rate, you may lose if the personal loan is available at a lesser rate of interest. So to save yourself from overpaying your interest rate.
Pre-qualified
Once you find the best deal that matches all your requirements then you have to go through the pre-qualification process. The pre-qualification process will be different from lenders to lenders. Exact steps will be quite different from lenders to lenders. As you apply either in person, online, or through the phone. All they will ask you for is your name, income, address, employment details along with the amount you want to borrow. Once they review your application they will send you the loan options. However, don’t just prequalify for one lender. Look for several dealers and their options and pre-qualify them. This way you will be able to grab the best deal at better rates.
Look for alternatives
Although the personal loan is undoubtedly the best option it is better to know your alternatives before finalizing your options. So analyze your situation and your urgency for money and then look for different alternatives. For example, you can get a 0% APR credit card which will be beneficial in case you want quick cash and are confident to pay back in full on time. So look for different options and gather all the data and then discuss it with your family and decide.
Submit your application
Once you have decided on the lender and have finished the prequalification process you can apply with the best lender. You can do it either through in-person, online, or through the phone. Then submit all your documents that are necessary such as tax returns, ID proofs, and recent payslips. Once you finish the process the lender will perform a credit inquiry. This will have an impact on your credit score so to not affect it negatively don’t apply for too many loans at a time. It will take a few days to accept your loan and you can accept your loan and it will be beneficial if you set automatic payments so that you don’t miss payments.
Wrapping up
These are the simple steps that you will have to follow to get a personal loan. For more interesting articles on how to make money, check out here.
