Are you looking for ways to cover a few expenses such as credit card debts, chase an adoption or move across borders without breaking your savings nest then a personal loan can be the best thing to look for. Although, getting a personal loan approved can be a hassle-free experience for some and a nerve-wracking for others.
What is a Personal Loan?
A personal loan is a loan borrowed from a credit union, online lender or a bank that can be paid in fixed instalments over two to five years. In general, the personal loans are unsecured (which simply means loan can be obtained without a collateral unlike for a home or car loan). Also, the loan amount, rates and terms may vary depending on your credit score. Here are the 6 steps to getting your unsecured personal loan:
What’s your credit score?
A credit score is a very important number that shouldn’t be ignored,as it plays a vital role in the entire loan process. Having a strong credit score can get you all the best deals from an easy loan approval to lowest interest rates. The credit score is calculated based on a lot of factors such as credit history, number of credits, timely payments etc.
So, when was the last time you checked your credit score? Here is the free ways to check your credit score.
Do your homework on available loans
It is recommended that you do some homework on the loan options available and look what’s on store for you. You can pick from small local lenders to big financial institutions such as Discover,Citibank etc. You may go for credit union if you’re looking for a small loan amount with a lower interest rate. You can do a pre-check to understand more on the factors influencing your loan process.
How about getting pre-qualified for a loan?
Pre-qualifying for a loan can give you the insight and understanding of your current situation.
The info you need to provide for the pre-qualification process:
- Date of Birth
- Social security number
- Employer details
- Address, phone number, email etc.
But there are chances that you may not pre-qualify for a loan and the reasons may be bad credit score, less salary, little or no work history, debts etc.
Do a comparative study on the various credit options available
Never be satisfied with just the one that crops up first especially when it comes to personal loan options available. Analyse the credit options that are available such as:
- Are you eligible for a 0% credit card?
Having a good credit score can fetch you a credit card with 0% interest. It can be the best option if you can repay the loan amount on time.
- Which one should you pick: secured loan or unsecured loan?
If your credit is bad, then secured loan may be a great choice to get better interest rates. All you need is a property as a collateral.
Read the terms and conditions properly
Before you say yes, you need to read every line of the terms and conditions mentioned. You can narrow down your gaze to the following:
- Automatic Withdrawals: If the lender requires you to set up automatic withdrawals from your account then keep monitoring your account to avoid overdraft fee.
- Exit fee: See if there’s any fee charged for early closure of loan.
- Annual Percentage Rate: See if it clearly indicates the total loan amount, origination fees etc.
- Flexible payment options: waiver on late payments
- Direct payment to creditors:Can be beneficial for debt consolidation
- Are the payments reported to credit bureaus? Can be an added advantage to your credit score if on-time payments are reported to credit bureaus.
The final approval processes
After doing your study on the personal loan options, you need to understand the documentation involved. If you’ve found the right lender to match your requirements, then the final loan approval process would require you to produce the following documents:
- Identification document such as passport, driving license, social security or state ID.
- Proof of Income such as payslips, bank statements, tax forms.
- Address proof such as copy of lease, property documents, utility bills.
Once you’ve submitted the above-mentioned documents, the lender would do a credit analysis for credit score, history etc. The final approval would mean getting your funds within a week.
You can get approved for a personal loan easily by following the above-mentioned steps that involves doing a study on the available options to understanding your credit score. Apart from choosing the right sources to get the loan, it is equally important to understand the terms and conditions as well.