How to Apply Personal Loan - MEDIA NEWS BD

How to Apply Personal Loan

A personal loan can help you finance a wide range of expenses, such as unexpected expenses, debt consolidation, or large purchases like a new appliance or vacation.

Applying for a personal loan may seem intimidating, but it’s fairly straightforward. Let’s walk through the key steps for how to apply for a personal loan as well as actions you can take ahead of time to make the process go more smoothly.

How to Apply for a Personal Loan
When you apply for a personal loan from any lender, you’ll likely go through each of these key steps, which we review in more detail below:

Determine how much you need
Review your finances
Research and compare lenders

Preparing to Apply for a Personal Loan
Determine How Much You Need

Consider why you’re applying for a personal loan and estimate how much you’ll need to borrow. This is a key step in how to apply for a personal loan. You can borrow between $250 and $100,000, so honing in on an amount will prevent you from borrowing more than you need. Later in the process, you can narrow down loan options since loan amounts vary by lender.

Review Your Finances
Assess your finances to figure out what you can afford before you apply for the loan. Review your income and expenses to understand your budget, or how much money you have coming in and going out each month.

Check your credit score since it will play a role in your loan eligibility and interest rate. Higher credit scores improve your odds of approval and allow you to qualify for lower rates. If your credit score is lower than you expected, review your credit report to see whether it includes errors that need to be disputed.

Research and Compare Lenders
Shop around with banks, credit unions, and online lenders to compare loan amounts, interest rates, terms, and fees. Review loan requirements if they’re available.

For example, some lenders have a minimum credit score or income requirements, or only offer loans in certain states.

Read personal loan and lender reviews and ratings to help you understand the best personal loan lenders, and then rank your top choices. Most borrowers prefer lenders with high-quality customer service and good experience, and that provide helpful information and prioritize meeting their customers’ borrowing needs, according to J.D. Power.

Some lenders offer pre qualification that allows you to view the loan terms you may qualify for. To pre-qualify, you usually only have to enter a minimum amount of information: your personal identifying information, income or employment details, and desired loan amount. The lender will review your information and do a soft credit check, which unlike a hard inquiry when you officially apply, won’t affect your credit.

A soft credit check can give you a preliminary decision, but keep in mind it doesn’t guarantee you’ll get approved.

Many lenders offer online applications, which are quick and convenient. Some lenders, particularly traditional banks, may require you to apply in person.

Either way, the loan application will ask for personal and financial information, like your name, home address, and employment information. You may have to provide additional documents, including your:

State-issued ID
Proof of residence
Income documents, like a bank statement or pay stub
Tax return

After you submit the application, wait for the results, which may be within minutes or in a few days. You’ll receive a decision faster if your application is complete and free of errors.

If you’re approved, the next step for how to apply for a personal loan is to review your final loan documents, then accept and sign them. Your loan documents will include the loan amount, interest rate, repayment term, and monthly payment amount. Within a few days of acceptance, you should receive funds in your bank account.

Alternatives to a Personal Loan
If you need financing for a large expense, but don’t want to use a personal loan, you can consider alternative options. Some of them include:

Credit card installment plan: You can pay off large transactions with fixed payments with a credit card installment plan. If your purchase is eligible, you can select the installment plan option through your online account.

Home equity loan or line of credit: If you use your home equity as collateral for a loan, you can usually get a lower interest rate. If you have enough equity and good credit, you can borrow a percentage of your home equity, typically no more than 80%.

Savings secured loan: You can use your savings account balance as collateral for a loan with a savings secured loan. These loans are generally fixed-rate loans that may allow you to borrow up to 100% of the amount in your savings account. However, if you can’t afford to repay the loan, you will lose your savings to the lender.

Family loan: Borrowing from family members can provide funds for your expenses, but this strategy does have downsides to consider. Late payments or unpaid loans can potentially damage your relationship.

How Much Can You Borrow With a Personal Loan?
You can generally take out a personal loan for up to $100,000, but several factors affect the amount you can borrow with a personal loan. Maximum amounts vary by lender and your state. Lenders will consider your credit history, ability to pay, and other factors to determine your loan amount.

How Long Does It Take to Get a Personal Loan After You Apply?

It can take several business days to get a personal loan. First, the lender will review and approve your application. You’ll have to review and accept the loan agreement. After signing, you could receive your funds the next day or it may take several business days to receive your funds, depending on the lender.

Can You Return a Personal Loan If You Don’t Use It?

Depending on the lender, you may have a limited time to cancel and return a personal loan with no interest or penalty. Otherwise, if your lender doesn’t offer the option to return your loan, you can pay it off immediately, though you may be subject to interest and prepayment penalties.

Does Your Credit Score Go Up After Paying Off a Personal Loan?

The impact of paying off a personal loan on your credit score depends on the information in your credit history. Your credit score may drop after paying off a personal loan if you don’t have any other open installment loans on your credit report because it will affect your credit mix.