- 1 how to apply for a personal loan
how to apply for a personal loan
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How To Apply For a Personal Loan
Personal loans can be a relatively simple way to secure additional cash. One excellent use of a personal loan is to pay off high interest debt, such as credit card debt. If you can get a personal loan at an interest rate of 7 to 10% and use it to pay off credit card debt that carries a 19 to 26% interest rate, you will improve your overall financial situation.
Unlike collateralized loans, such as mortgages or home equity loans, an unsecured personal loan won't come at the lowest loan rate possible. However it can still be a good loan vehicle to use when you don't want to get a collateralized loan, or when you lack the option to do so.
With the advent of the Internet, sources for loans have expanded well beyond just your local bank or credit union. A local branch of the bank or credit union where you do your usual banking is still likely to be your best bet for finding the lowest interest rate on a personal loan. Meeting with a loan officer face to face provides the opportunity to discuss the loan and review your overall finances at length. A loan officer at your local bank may be able to suggest an alternate, less expensive means of accessing extra cash, such as a line of credit. If the loan officer knows you personally, he's more likely to give you the benefit of the doubt if you're right on the line for approval.
Dealing with a local financial institution will also typically get you the cash you're looking for in the shortest period of time. It's even possible to walk in, apply for a loan and walk out with the money. Banks also typically offer more flexible loan terms than online sources, such as peer-to-peer lenders. The one major negative factor in dealing with traditional banks is that they usually have the highest credit worthiness standards to meet, often requiring a minimum credit score of 700.
Credit unions tend to be a bit less demanding regarding credit worthiness and may offer lower interest rates, but for the most part, this only applies to their existing customers.
Another plus for banks and credit unions is that there are usually no loan origination fees involved
Online peer-to-peer lenders such as Prosper and Lending Club have become increasingly popular. It takes a bit longer – up to a week or more – to secure a loan, but these online lenders are generally easier to borrow from with imperfect credit. A typical credit score cutoff is around the 640 level, and some lenders consider borrowers with credit scores as low as 600. Interest rates should be comparable to, and perhaps even a bit lower, than what you could get from a traditional bank. There may be some flexibility in repayment terms, but most online lenders tend to offer fixed-term loans, and the terms are often shorter than what you might be able to negotiate with a bank. While a traditional bank might extend the loan out for five years, online lenders rarely make loans for terms of more than three years.
To apply for a loan on one of these sites, register with the site and fill out a loan application, just as you would with a traditional bank. Most peer-to-peer lending sites require that you pay a loan origination fee, typically ranging from 0.5 to 4.5% of the loan amount.
Payday or Cash Advance Lenders
This is the place of last resort for a personal loan, and it's only useful for borrowing a very limited amount of money for a very short time frame, typically one to two weeks. Still, if your credit isn't the best and you just need to borrow enough cash to cover a major bill, such as rent or electricity, these lenders provide an option. However, it comes at a very steep price. Expect to pay back up to 125% or more of what you borrow, and that's just for payday loans. If you access an online lender of this type, expect to pay a hefty loan origination fee as well. The only positives for these types of loan sources are that you can secure the loan immediately and that they usually only require proof of income rather than checking your credit score.
Tips for Getting the Best Loan Deal
Credit scores are paramount in determining the interest rate you can get for a personal loan, so anything you can do to improve your score prior to applying is well worth the effort. It also helps if you pay down your credit card balance or other outstanding loan balances as far as you can before applying. Make sure you have all the necessary information with you for the loan application, including W-2 forms or paycheck stubs, address verification and documentation of all your monthly debt obligations.
How to Apply for Personal Loans
A personal loan can be a great way to build credit or as a short-term solution to a specific financial need. A bank, credit union, or other lending institution will provide you the funds you need in return for the promise to pay back the money over a fixed period of time at a given interest rate. The specifics of how to apply for personal loans may vary from lender to lender, but the basics are the same.
Determining Your Budget, Credit, and Needs Edit
How to Apply for a Personal Loan Without Income
Most consumers can benefit from a personal loan from time to time. Unlike auto loans and mortgages, consumers can use personal loans for anything from debt repayment to vacations. Having a steady job with a good source of income is the easiest way to qualify for a loan, but many consumers can still qualify even without a source of income by using their financial assets as collateral against the loan or finding a co-signer.
Create a list of any sources of alternative income you receive, such as child support payments, alimony or Social Security payments. Gather proof of these forms of income from check stubs or statements.
Create a list of your liquid financial assets, including your checking and savings accounts, private retirement accounts, 401Ks, personal stocks and bonds. Gather current statements for these assets.
Create a list of any other financial assets you have, such as a home or vehicle. You may be able to use these items as collateral against a personal loan.
Ask a friend or family member with good credit and a source of income to co-sign your personal loan. A co-signer agrees to take responsibility for the debt if you default on the loan. This backing improves your chances of qualifying for a personal loan.
Visit your bank and request a personal loan application in person. Having a pre-established relationship with the bank may help you qualify for a personal loan.
Complete the loan application in its entirety, ensuring you include information about any financial assets you have and your co-signer's information.
Provide your banker with your completed application, your identity information and proof of your alternative form of income and financial assets.
Open a secured loan if you cannot qualify for a traditional personal loan. With a secured loan, you will need to provide either collateral, such as a car, to back the loan or fund a savings account or CD, which the bank will hold until you pay off your loan in full.
How to Apply for a Personal Loan
Details Published on Thursday, 04 September 2014 03:30 Hits: 2229
Personal loans are unsecured debts that usually involve smaller amounts of money, usually for personal use. After you have given much thought about it, and finally decided that you need to acquire a personal loan, then there are several options to consider. In this day and age, there are countless channels from which to acquire loans for personal use.
Remember that you’ll be borrowing a significant amount of money, and you must have some way of paying it all back eventually. The first thing you have to make sure is that you have a stable job, at least for the time it takes to pay the loan. You also need to have proof of identification and capacity to pay. Most moneylender companies prefer government issued IDs as these make you more identifiable in the grid. It also helps to have a high salary. Companies don’t have to think twice about your financial capacity, and loan approval takes only a few hours.
Lastly, make sure you provide means for the companies to easily contact you. They may call you from time to time to remind you of payment details, and to make an set a specific date for payment. Companies who’ve had a difficult time contacting you may mark you with a bad credit score. Always have your mobile phone on hand when you’re expecting them to give you a call.
Personal Loan Channels
There are several types of loan channels that you can access, provided you satisfy their requirements. Banks are a primary example. A Personal loan in Singapore is among the easiest types of loan to acquire from banks. Each bank differs in their requirements and rates. It is up to you to consider loans with requirements that you satisfy, and the amortization rates that you can afford. Disadvantages of banks are the ton of paperwork required, as well as the processing period and approval that may take some time, depending on the amount borrowed.
There are also companies that offer money lending services, and these are a great alternative to banks. This type of channel may require less paperwork, and sometimes offer much cheaper rates than banks do. There are also online channels that require simple registration. These channels evaluate your credit score using the power of social networks. The more contacts or followers one has that can vouch for him or her for a personal loan, the easier it will be for that person to have his loan approved. Lenders evaluate prospective borrowers with a simple click or tap of a button.
Once you get approved by your loan provider, it is very important to take note of valid payment channels. Banks are the primary payment channels, so there’s little need to worry about how to pay them back. Smaller companies may have their own preferred payment channels. Some use banks, others use payment centers, and still others use mobile banking. Don’t hesitate to ask and clarify what your payment channel is. If there are multiple options, stick to the one that you find the most convenient.