If you’re planning to borrow money to consolidate credit card debt, move to a new home, or meet any financial need, a personal loan can be a good option. To get this kind of loan, there will usually be no collateral needed. But definitely, you will have to look into a few things before taking any step.
With a strong credit score, you have a better chance of qualifying for a personal loan and getting a lower interest rate. If yours isn’t exactly stellar, do something to improve it before you apply. First off, you’ll have to start making on-time payments and spending under your credit limits. Request a free credit report as well and review it, making sure any errors are disputed.
Through loan prequalification, you can see what what potential offers you might get. A lot of online lenders will do a soft credit check during prequalification, which will have no effect on your credit score, so take advantage of it early on. At prequalification, you will be required to supply some basic information such as your income source, employer background, Social Security number, and so on.
As with any other type of financing, a personal loan has terms and conditions tied to it. Pay close attention to prepayment charges, APR additions (your APR should cover all fees from the get-go) and automatic withdrawals (get a low balance alert programmed into your checking account to avoid overdraft fees). See to it as well that the lender reports payments to credit bureaus, pays creditors directly (for debt consolidation) and has flexible payment features.
Submitting an Application
Once you have compared a number of loan providers, you can pick one that is most suitable to your needs and preferences. Before you apply for a personal loan, be ready with a state-issued ID (Social Security card, driver’s license, etc.), address verification (copy of lease, utility bills, etc.), and evidence of income (pay stubs, tax returns, etc.). The lender will run a hard credit check too, and you should know that this will have an impact on your credit scores. With all your paperwork in perfect order and assuming you meet all the requirements of the loan provider, you will probably receive the funds in your bank account within a week.
Though a personal loan can surely help you survive a financial difficulty, it is important to explore and study your options before picking one. Look for the lowest rates, borrow only money you need, and make on-time payments. And remember, make comparisons because this is the only way to know which option is best.
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