As much as we try to keep our financial strategy under control, there are moments in our life when we have large expenses but don’t have any money in our savings. Those are the moments when we thought of getting a personal loan. There are many things a personal loan can help you with: from dealing with unexpected expenses and serious investments in dealing with spending issues and organizing big events like the wedding. However, there are a few factors that will determine whether a personal loan will be approved or not and there are a few steps you need to be aware of before starting the process of applying for a personal loan. Here we wrapped up some necessary information to guide you through the entire process.
Start with a plan
-Determine how much you need to borrow to achieve your goal
-Think about and decide how much you can afford to pay each month on a personal loan
-Use a personal loan calculator to estimate the time needed to pay off your loan
-Estimate whether you can qualify for a loan. Essentially, you need to have certain credit and income qualifications, be under 18 and have a household income of $25000 or more.
-Check whether there are some fees or prepayment penalty you need to pay
It’s very important to create the plan so that you would know what to expect.
- Check your credit
Since your credit score will determine how much you can qualify for a personal loan, it is very important to check your credit score. Although most lenders will require good credit scores, there are personal loans for people with bad credit. There are many ways you can check your credit score from checking a credit card statement to talking to a credit counselor. Also, make sure you take a close look at your credit report so that you know that all the information is accurate and up/to/date.
- Search for the right lender
Interestingly, many people overlook the importance of a lender when applying for a personal loan. However, choosing the right lender for your situation is half of the job done. \You need to ensure you are working with someone you can always rely on. In order to find a reputable lender, do a small research. You can either read online reviews or talk to people who have had the similar experience. Reviews can give you insight into potential issues as well as the lenders that stand out from the crowd. Check interest rates, fees, loan terms and payment options before signing any documents
- Read the fine print
Read the terms of loan offers and find answers to important questions like:
Are there any prepayment penalties?
Although most lenders don’t charge a fee for paying off earlier than expected, it’s always good to check.
Does a lender require payments to be automatically withdrawn from your checking account?
If the answer is yes, consider setting up a low balance alert with your bank to avoid overdraft fees.
Will there be any APR surprises?
Make sure that the total amount of your loan, including origination fees, is clearly disclosed and included in your annual percentage rate.
Are there any flexible payment features?
The good news is that some lenders allow you to skip a payment in case of hardship, let you choose your payment due date or even forgive an occasional late fee.
- Gather personal information
Here is the checklist of things and documents you need to gather before applying for a personal loan:
-Household income information
-Bank account number if your funds will be directly deposited into your savings account
-your contact information
-tax information – some lenders require this as well, so its good to have these documents prepared
Once you have gone through all these steps, you are ready to fill out the application. Don’t forget to carefully review terms before you accept. You can even ask a trusted friend to give it a look as well.
Although taking out a personal loan can help you solve your financial issues, make sure you consider your options before settling on one choice. Also, always be prompt with your repayments so as to avoid getting into even bigger debt.