Knowing about the process before you apply for your loan can help you on your road to finance. Find out how to get a personal loan with our guide.
Personal loans can help you buy a new vehicle, pay for home renovations, or get out of debt. You can even cover adoption costs with a personal loan. But what is the process of getting a personal loan?
Decide what you need
Finding the right loan starts with you knowing what you need and what your current circumstances are. Say you’re looking to purchase a car. If you have a good credit rating, a secured personal loan might give you a lower annual percentage rate (APR)., However, if you have bad credit, you may need to consider an auto title loan (where the vehicle itself acts as security for the loan).
You also need to think about how much you need to borrow, how long you’ll need to repay it and what kind of payments you can afford. Any additional features you’d like from your loan (such as the ability to pay it off early) should also be noted.
Find the right loan type
There are various loan types available: Secured loans, unsecured personal loans, payday loans, auto title loans, installment loans for bad credit, and so on. Once you’ve decided what you need from your loan, have a look at the different loan types and decide what features best match your needs.
See what lenders are offering
Different lenders have varying loan types on offer. For instance, a bank will offer a range of personal loan and credit card products but is less likely to have solutions for you if your credit score is low, or may only be able to offer you a higher APR. Other lenders may only have products for bad credit borrowers, such as payday and installment loans.
Find out about eligibility and APR
This is one of the most important steps to take before applying. Lenders list basic eligibility criteria that needs to be met before you can apply for the loan. They also list an APR range that the personal loan can fall in.
Depending on your credit history, you may get an APR anywhere in that range. Bad credit loans such as payday loans come with a standard APR that is offered to all borrowers. Some lenders, such as peer-to-peer lenders, let you get a rate estimate without it affecting your credit score. It’s important to know what your credit score is and have a fair idea of what APR you may be eligible for before you apply.
Compare your options
The way to find the best personal loan is to decide what you want and then to compare all of your options to make sure you’re getting a competitive loan. How much is the lender charging in fees? How does this compare to other similar loans? It can also help to compare the additional features offered by lenders. Remember to keep in mind the eligibility criteria of loans and the APR you may be offered.
Gather what you need to apply
The information you need to apply will depend on the lender and the type of loan you’re applying for. For most loans you will need documents to confirm your identity, to prove your address, to verify your income and other financials, and you will also need information regarding your employment. If you’re applying for a secured loan you will need additional documentation regarding the security.
Submit your application
Once you’ve settled on the right loan, it’s time to apply. The majority of lenders offer a convenient online application, but you may also be able to apply in-branch or over the phone. You usually won’t have to fax over any documents if you apply online but you should check this before you apply. Turnaround time for approval and receiving your funds differs – timeframes fluctuate from a few hours to a few weeks.
Personal loans can be an option to consider when you’re in need of funds. Understanding the ins and outs of the process can help you confidently settle on the right loan.