Personal loans are the kinds of consumer loans that are provided to the consumers for use at their own discretion. Some of the common reasons which the consumers obtain for this type of loan include the need to pay off medical bills, to pay for a sought after vacation, to make changes to their home, or even pay for a wedding.
This method of financing can either be secured or be unsecured and it also has a fixed loan amount and a term, which means that the consumer gets the funds once and then makes fixed payments at a predetermined interval. Some of the loans have prepayment penalties while the others allow them to make extra payments at no extra charge, so the consumer has to make sure that he reads the fine print and he should know all of the details on the loans in order to ensure that he understands the terms.
However, the general process that is followed for applying for personal loans:
- The consumer is required to Figure out what he needs in a personal loan, and what are the credit and the income qualifications which he needs to meet them.
- He is then required to find personal loans that meet his needs.
- He is supposed to get pre-approvals from several lenders and then he is required to compare those personal loan offers to choose which is best for you.
- He then has to complete a final personal loan application.
- At the end, he is required to sign the loan agreement and then receive the fund disbursement.
Get a personal loan that meets the consumer's needs
In order to find a personal loan which is right for the consumer, he must first figure out what he's looking for.
He'll need to consider his needs , financial situation and the credit.
1. The consumer first needs to define how he plans to use the personal loan
While some of the personal loan providers allow the customers to use funds for any purpose, others, however, limit how a personal loan can be used.
The payoff, for example, is an online lender that solely helps to focus on the credit card debt consolidation.
2. He is then required to Figure out how much he needs to borrow
Most of the lenders have a minimum and a maximum balance for personal loans.
So if he knows how much he needs to borrow, he can quickly determine if a lender would agree to those terms or not.
3. He is then required to take an honest look at his financial situation
4. He can then calculate the monthly payments which he can afford
Before getting a personal loan, it's important to know if the consumer can actually afford the monthly payments.
Getting a personal loan which one can afford will always include choosing of the terms that result in an affordable monthly payment. The amount of these payments will be determined by the terms of his personal loan:
- Initial balance, or how much he can borrow when he takes out a loan.
- The Repayment length, or how many months he will need for repaying the loan.
- The Interest rate, or the fact that how much the lender will charge the consumer each month to borrow money.
5.
Check the credit score and the reports
Once the borrower has a handle on his own financial needs, he'll want to check his credit. He can, however, view his free annual credit reports through a lot of credit score checking websites.
Make a list of your personal loan needs
The borrower should do research on different types of personal loans and features in order to make sure that he has thought through everything he needs.
The person is required to Make a full list of all his needs and requirements for a personal loan, including the monthly payments, balance, credit requirements and more. This will give him a checklist and he can compare lenders against to ensure if it's a good fit or not.
Comparing of personal loan companies in order to find the right lender
The borrower should Check out the personal loan companies of all kinds, ranging from online lenders to big banks and credit unions. These various are the various types of lenders which have different structures and business models – which however means that they'll also have a distinct underwriting process, fees, and interest rates.
The borrower is required to Identify personal lenders who would meet his needs
The borrower should research the credibility of each lender, as well, in order to ensure that it's legitimate. He must Try to find at least the three personal lenders that will both meet his personal loan needs and also have credit requirements which the borrower would satisfy.
Get multiple personal loan pre-approvals
In order To get the best deal on a personal loan, the borrower is required to have options. He'll get these when he would apply for pre-approval with a few lenders that help the lender in order to meet the requirements on his personal loan checklist.
In a pre-approval application, the lender will, however, ask for some limited identification and financial information such as:
- Name, birth date and other identifying information.
- Contact info like an email, phone number, and the residential address.
- The Employment history including job title, current employer, and income.
- Loan details like the desired balance and how the borrower intends to use the loan.
Many of the pre-approval processes also include a credit check.
The borrower must make sure that it's a soft credit pull, which won't affect his credit score.
Compare personal loan interest rates
One of the most important factors that determine the cost of the personal loan is the interest rate, or the annual percentage rate (APR).
This helps to tell as to how much interest the borrower will be paying on his personal loan.
Watch for personal loan fees
In addition to the interest rates, personal loan fees can also help to add to the costs. Personal loans however typically charge an origination fee of one to five percent of the loan amount.
Fully research each lender
The borrower is required to Look into the personal lender reviews and see as to what kind of experience the customers have had with the company. He must Make sure that all personal loan companies which he's considering have transparent costs and fees.
Apply for and get a personal loan
After passing all these steps the borrower would've identified a lender that meets his needs. He's been pre-approved and would've also compared the personal loan offers. He would've probably identified the personal loan with the best terms for him.
Completing a personal loan application
The next step, however, is to apply for a loan with the lender who is his top choice. He'll fill out a full personal loan application similar to the pre-approval application, but it might ask more detailed or in-depth questions such as:
- The Proof of identity such as a passport, driver's license, birth certificate.
- The Social Security number.
- Proof of employment and income, such as an offer letter or a recent pay stub.
- The Bank account number to which the lender can deposit loan funds.
The application would however also include a hard credit pull in order to give the lender greater insights into the credit history.
Signing a personal loan agreement
Once the lender, however, receives the signed loan agreement, it will disburse the funds to the borrower's account, usually through direct deposit. It, however, might take a day or two for the transfer to the process and deposit.
Once the borrower has received the money, he's free to use the personal loan funds how he wants.
Thus, getting a personal loan isn't too complicated. However Choosing the right loan that works for the borrower would require research, comparison, and some tough decisions.
But getting the cash which the borrower needs now, without compromising his financial future, is the key to making wise decisions when getting a personal loan.
