A personal loan is short-term loan banks, private lenders, credit unions like non-bank peer-to-peer lenders, online marketplace lenders offer to consumers. The loans given to consumers can be used for any purpose, like opening a business, paying for family needs, financing a home renovation, paying off debt, for wedding or adoption, etc.
Borrowers get any amount of money base on the policy and terms and conditions that can be repaid over a period of time.
Most personal loan terms are from 24months to about 60 months, while some can extend to 72 months. Meanwhile, most of the personal loans can be paid in monthly installments, which are alike with a car and home mortgage.
However, personal loans are unsecured, this means that they are not backed by collateral while taking the loan, no car, house, or other valuable assets.
If you are urgently in need of cash, these loans are the best alternative, because it is less stressful and its approval and funding process is fast.
How to Qualify for a Personal Loan
To qualify for a personal loan, there are many steps you have to take, and one of the important steps is knowing if it is right for you.
For example, if you need a loan to renovate your home or let’s say buy a house, applying for a home equity loan or an auto loan will come with a cheaper interest. Unlike personal loans that are unsecured and based on your creditworthiness.
However, sponsoring your family vacation or paying off debt fits in a personal loan category. It is advisable to check a 0% introductory APR credit card.
If you are taking that way of loaning money, you have to be sure that you are capable of paying the balance before the 0% rate expires.
Check if you are eligible for Personal Loan
To know if you are eligible. You can visit lender websites or make phone calls to check if you can make a load with your current financial profile from that lender. You have to check if the lender has a minimum required credit score.
And also if there is an income threshold. Also, determine the minimum length required of credit history. Most times 3 years or more is the minimum length.
Check Your Credit
Before you can make a personal loan it mostly depends on your creditworthiness. So you have to check your credit scores and get an updated credit report from the three credit agencies, TransUnion, Experian, and Equifax, you check this before you can apply.
However, you can get a free credit report from any of the major credit reporting agencies once a year. Majority of loan and credit card companies offers free credit score monthly from the major credit reporting agencies.
There are some services that offer free credit scores, credit reports, and other financial services, like Credit Karma. While others offer a free trial before they charge.
Decide How Much You Need To Borrow.
You should have in mind that when you make a loan, you don’t just pay the original loan back. There is no need for requesting a loan. If you do not need it or taking for extra loans without any need for it.
It is best you borrow what is necessary. On the other hand when you take a loan less than what you need. Then you may be forced to source for more expensive loans at a late hour.
Apply for the loan For Personal Loan
Once you have known more about taking a loan, its now time to apply for a loan. If you are taking a loan from more than one lender. It is best you merge all applications in a period of 14 – 30 days.
You will get all the requirements and documents needed to get your actual application from your preapproval letter. You get all the documents first. As you are most likely to be expected to provide.
Housing costs, debt, proof of income (W2 forms, pay stubs). And also social security number (if it is yet to provided in the preapproval). Then you submit your documentation and wait for results.