I will share complete guide to apply for a personal loan. You can use these important three steps to take loan. I will also share the documentation required for taking a personal loan.
Ever tried to apply for a loan? If not, this piece is just for you. You may have some previous knowledge on how to apply for a credit card but maybe not a personal loan.
How to Apply for a Personal Loan in 3 Steps
Your knowledge is valid but it does not quite equate to the application for personal loans. This process may require more time and effort than applying for credit cards. Let us get into the three steps to apply for a personal loan. Every step is equally important and you should be careful throughout your application process but it’s always helpful to start right.
The First Step to Apply for a Personal Loan
You would need to pre-qualify and compare various offers; Pre-qualification is a very common and important step when applying for personal loans. This step gives you insight into many important factors that can affect your choices when apply for a personal loan.
For example, you would have a preview of the terms and conditions for applying for the loans. You would also get some insight into the rates and also payment plans and instructions before finally diving into your decision. This pre-qualification process is not time-consuming and can be done in under 5-6 minutes. If you were wondering whether pre-qualification is an uncommon factor, the answer is no. It is quite common among some banks and a lot of online lenders as well.
How Will Pre-Qualification Affect My Credit Score?
Unlike hard inquiries/hard checks, pre-qualification requires a soft inquiry that will not affect your credit score. When planning to take out a personal loan, one thing you have to be very conscious about is your credit score. This is a very important factor that lenders take into consideration when checking for eligibility. So, it is good to note this detail and correct any credit errors that you might have before seeking out a loan for pre-qualification.
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Requirements To Apply for a Personal Loan
Your information is very key for pre-qualification in order to get a personal loan. The lenders you want to borrow from would have to get some basic information asides from your credit score which they already get through the soft inquiry run. Some basic information needed should include personal information like your name, address, date of birth, income, educational background and monthly mortgage or rent payment.
They would also want to know why you might need this loan in the first place. They want to be able to tie your requested loan to the reason you are seeking out this loan. Another piece of information required is your repayment term and your desired monthly payment. Also, lenders would like to know how much you are requesting. Some offers can go from $1,000 – $50,000 and some repayment terms can range from two to five years. Your social security number might also be requested by some lenders during pre-qualification.
How Long Will Pre-Qualification Take
This is usually not a tedious task. After submitting your information required for pre-qualification, it typically takes from some seconds to a few minutes. Once you qualify for an offer, a fresh page pops up to give you a view of potential rates and terms for you. This might as well be followed up with an email from your lender to provide you with contact information for customer service and a guide to help you with completing the application.
The Second Step
It is now time to compare your options and select which loan you think is well suited for you. In case you have only sourced out one lender option, it is time to look for more. It is always good to have a list of options to choose from, compare rates and terms and have a pool of choices to pick from. At this point, some questions might come up, like:
How To Select The Best Personal Loan Option?
One important thing to make sure of before you pick out a loan is whether the monthly payments would be comfortable for you to meet up with. How you can make sure of this is to first know your total cost of borrowing, which is your APR (annual percentage rate). The APR will consider your interest rate, all additional fees and can vary based on factors like your income and credit score. So, the lower the APR goes, the lower the cost of the loan.
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Requirements For Your Loan Application?
Now that you have the loan offer choice that suits your budget, there are some necessary documents and information you would need to submit to complete your application. You would be required to provide: Proof of address, photo Identification, education history (which should include the highest degree you’ve earned and actual dates), proof of employment status, financial information; any outstanding debts, total savings, retirement assets, and then if it wasn’t already provided earlier for pre-qualification, your social security number.
The Third Step
You are almost done at this point and it is time to submit your application and get funded. Be careful to go through the terms and conditions properly before submission to make sure that nothing skipped you. You don’t want to be left to deal with a term or condition that you are not comfortable with.
Once you are good with everything, you are free to submit your application. While filling all the requirements in your application process and providing necessary documents, make sure all the information you are providing is correct and not deceptive. This is very important as the lenders would verify your information and any errors might affect your loan application.
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How Long Does It Take For Your Personal Loan Application To Be Approved?
Some approvals may just take one day or less if everything is verified and checks out. If you are required to submit extra documents or information, note that the approval process may take longer. If this happens, the lender you are dealing with will get in contact with you and inform you of the necessary documents required of you to complete your application process.
How Does This Loan Application Affect Your Credit Score?
While submitting this formal loan application, you would need to know that a hard credit check would be triggered. This, unlike the soft inquiry or check, would affect your credit score report as it can knock off up to five points on your FICO score and this would remain on your credit report for about two years and maybe a bit over that.
Does Funding Take Time?
Once you are approved and your agreement with the lender is signed, funding takes place as quickly as the lender you choose makes it. If you are dealing with banks and similar traditional lenders, your funds will likely get to you in about five days, or earlier. A good number of online lenders can work out same-day funding. Once this is done, prepare your monthly payment budget to stay on top of your repayment plan.
If you have opted for automatic bank payments, your repayment would be done directly from the bank account you have provided in your application process. Make sure to stick to your payment plans to avoid any issues and additional costs that may apply due to late payments.