Enormous expenses will come along whether you are expecting them, and you may need to complete a personal loan application. A personal loan can be a stressful part of your life. You want to be prepared for it.
Before completing a personal loan application, learn what you will need to help ease some stress. Also, here are a few tips to help you increase your chances of getting approved.
How Much Money Do You Need?
Foremost, you will want to know how much of a personal loan you need. They base this on how much the expense is, as well as your income.
The best approach is to decide how much you can make in payments per month. Ask to borrow less than the highest number you come up with to ensure you are not running your monthly budget too thin.
If you request a loan that is too small, you still have money out there that you need to cover the expense. If you borrow too much, you’ll pay more interest. You should calculate the debt cautiously and ensure that you are prepared to pay it back accordingly without putting yourself in harm’s way.
Types of Personal Loans: Which is Best For You?
There are a few options for personal loans. Types of personal loans include unsecured personal loans, secured personal loans, debt consolidation loans and medical loans.
An unsecured personal loan is the most common. It is a loan for general personal use that is without collateral. A secured personal loan is a loan for personal use that is backed by collateral.
Debt consolidation loans are personal loans where you can take care of current debts with simpler repayments for a better rate.
A few personal lenders offer medical loans which have special financing options. You can use this for medical procedures and dental procedures.
The aforementioned are typical types of personal loans, but there are other options available for a lot of different purposes. You can check with your lender to see what they have.
Find the Right Lender For You
Credit unions and banks can offer a more firsthand customer experience, such as a Chase personal loan application or a USAA personal loan application. If you are a current customer, you might even get a rate at a special discount.
This may take longer than an online personal loan application. The application can be more complex, too, and require additional documentation.
Think about what you care about most before deciding on the lender. Do you want personal attention and superior customer service, or is it more important that the process happens quickly?
Take a Peek at Your Credit Score
Your credit score and credit history will ultimately decide whether you qualify for the amount of credit you are requesting. The higher your credit score, the higher your chances are of getting approved. Also, the better your chances are of getting a competitive rate.
While there are different systems for credit scores, many use FICO. FICO has the following four categories.
- They measure excellent credit as 740 plus
- They measure good credit from 670 to 739
- They measure fair credit from 580 to 699
- Poor credit is under 579
Many lenders want good credit and one year of credit history in order to consider you for an unsecured loan. Check your FICO score before you complete a personal loan application.
Know the Lender’s Requirements
You want to know if you are eligible for a personal loan before you apply for it. Check the eligibility requirements before choosing a lender, and make sure you meet their parameters. They usually look at:
- Your annual income
- Debt-to-income ratio
- Your credit rating
- Your credit history
Compare Personal Lenders
Shop around; you don’t have to go with the first lender you meet. Check their fees, pay options and interest rates.
Importantly, read the fine print, the loan terms before you complete a personal loan application. They do not show some fees until after you apply, like late fees.
There are some scammers out there, unfortunately, and you should be on the lookout for such unscrupulous lenders. You can check and see that the state has the lender registered. Also, the lender should have a lot of business information accessible.
Assemble Your Documents
When you have the required documents ready to go, your application will move along quicker. The sooner, the better, as you can get approved faster. If you are not sure, just ask the lender what type of documents they need before beginning the application process.
Typical requirements include:
- State-issued ID
- Social Security number
- Bank statements
- Proof of employment
- Employer’s contact information
Some personal lenders have a pre-approval process, and this can be helpful. This will give you a sign of what to expect with the loan terms and even the potential rate.
Plus, this gives you the opportunity to compare personal lenders. You can put a few pre-approvals side by side and see what the best option is.
For example, you can compare a USAA personal loan application and a Chase personal loan application.
Doing this will help ensure that your credit score doesn’t take a hit, as they didn’t run your full application through. Keep in mind that a pre-approval is not final, and the lender can change the terms of a personal loan once they perform a hard credit pull.
How to Complete an Online Personal Loan Application
Once you choose a lender, navigate to their website. Find the online personal loan application.
Complete your basic information and continue. You will need to answer questions about your personal details and financial standings.
Next, you’ll have to complete the personal loan application information. This includes how much you want to borrow. How long you need for payments.
The shorter the duration of the personal loan, the smaller the interest you will need to pay back.
Once you complete the online personal loan application, review the information again and proof your answers, just to check that you didn’t make a mistake or typo. Then click submit, and they will notify you about their decision. Some lenders can take a few days to get back to you.
Once approved, the lender will contact you to confirm. You may receive the loan funds as quickly as one business day.
Review the Offer
Even if the personal lender approves you, you don’t have to accept it. You may still decide you don’t want the personal loan that they offer you.
Take your time going through all the details before accepting; you don’t need to make a snap decision. Read the loan contract carefully. Review the terms, conditions and rate.
Is it the right fit for you? You will want to make sure it is before signing off on anything.
Accept the Loan Funds
If you decide to proceed, banks and lending institutions may only offer a few options for sending the funds. Maybe you have to have a checking account, and they will send the funds with a direct deposit. Some lenders may want to send a paper check.
If the way they send the funds is of value to you, simply ask the lender how they make the transfer.
Spending the Personal Loan
Often, you can spend the loan money on what you want to spend it on, as long as it is not college expenses. If you requested a loan because you needed it for a specific item, like a car or a home repair, spend it on what you intended to spend it on.
Paying Back the Personal Loan
You don’t want to hurt your credit score or pay additional, unnecessary fees, so make the repayments on time accordingly. When you complete the personal loan application, verify how it is you need to make the repayments.
Do you mail a check or pay online? Can you pay by phone and use a credit card? Are automatic payments an option?
The answers to such questions could make an impact on whether you choose a lender, to begin with. It will also impact how you pay off the debt.
Alternatives to Personal Loans
You don’t have to borrow money. Perhaps it is not the right option for you. If you are not ready to make a personal loan commitment, or maybe you are still building up your credit, here are a few other options you can consider.
Saving money is one option. You may have to wait, but you won’t have to spend money on interest and fees. In fact, you can earn interest with a savings account and learn how to budget.
A pay advancement can be an alternative to borrowing a personal loan. You may even do this through an employer. It can be a faster and cheaper way of taking care of an expense because of an emergency.
While they often have higher interest rates than a personal loan does, credit cards can be an option too. This is especially a good option for small expenses. Before you apply, just check the rates.
For more tips and financial life hacks, keep checking out our website. We love to keep you informed on topics similar to personal loan applications.