Applying for a personal loan is a common step in a number of ventures, like consolidating some debt, working on a home project, or making strides in a small business idea.
Whatever your reasons for applying for a personal loan, there are some universal things that you will need to think about in order to make sure you get approved. The process isn’t overly complicated and you should be able to get to where you need to be with a bit of time and due diligence.
Pay Attention to Your Credit Score
You may have heard this before but it is so important that it bears repeating: show some attention to your credit score before trying to get approved for a personal loan. Your credit score is crucial in this process, and may end up being the deciding factor in whether or not you get approved for the loan you seek. Even if you do get approved, your credit score is going to be key in determining how high of an interest rate you have to pay. So it makes good sense to take some time before you apply and try and get that credit score to go up just as much as you are able to [1].
Estimate How Much You Need and How Much You Can Pay
Before applying for a loan, it is also a good idea to have a strong understanding of just how much you are going to need to borrow. It won’t be very helpful to go to lenders with wild ideas and no firm reasoning behind it. Map out the number you need and how you will use it, so you can answer lenders’ questions straight forward and honestly. And also have a good idea of how much you will be able to pay back toward the loan each month. You need a real working answer for this, one that you will be able to reasonably meet each month. Knowing the answers to these questions is going to make you look like a good loan candidate to lenders.
Get Prequalified
Prequalification is a process in which you go to potential lenders and have them look at your financials briefly, to get you through the application process more quickly. This is beneficial for a couple of reasons. First, it will expedite your process and make you look more attractive to the lenders you ultimately apply to. After all, if a financial institution has already put their support behind you, that must mean something, right? And second, the prequalification process ends with some sample terms being provided to you. This is the first step in seeing what sorts of rates and fees you will receive, and is going to help you understand better if you can handle the payment structure and let you see which lenders will be most favorable to go with [2].
Compare Terms from Multiple Lenders
Now that you have been prequalified and you’ve seen some sample terms, it is time to compare. You don’t want to just take the first offer made to you. After all, this choice will have a big impact on your financial future. Take time to read all the details and look for any hidden fees that might be a part of each contract [3]. You want a good interest rate and a fair payback period. And don’t be afraid to negotiate. If you like one lender in particular but there is a line item in their contract that doesn’t appeal to you, see if they can budge on the matter. This is a two way street and you definitely have some leverage in how things go. Trust your instincts!
Make Your Picks and Apply
Finally it is time to pick a few different lenders and start the formal process of applying. Congrats! You want to choose lenders that are honest and forthright, who don’t mess about and who aren’t trying to pull a bait and switch on you. For the application process you will likely need a few simple things, like identification and social security card, as well as financial documents for savings accounts, mortgages, and any 401k you may have. Then it’s just time to wait for a reply. Of course, you have done your homework and set yourself up for success so you’re sure to get a favorable response!
Concluding Thoughts
Applying for a personal loan may feel like a mountain of a project, but it can seem so much more manageable when you break the process down into simple steps. By doing your research and arming yourself with good financial advice, you are all the more likely to get the loan approval you seek. Take time to diligently go over these steps and have confidence in yourself. This could be just the first step on the road toward the project or venture you seek to achieve with this loan. Roll up your sleeves and get started!
Sources:
- How to get a loan with bad credit: A comprehensive guide | CNN Underscored Money
- How To Prequalify For A Personal Loan – Forbes Advisor
- What Are Loan Terms? (2024) | ConsumerAffairs®
Applying for a personal loan is a common step in a number of ventures, like consolidating some debt, working on a home project, or making strides in a small business idea.
Whatever your reasons for applying for a personal loan, there are some universal things that you will need to think about in order to make sure you get approved. The process isn’t overly complicated and you should be able to get to where you need to be with a bit of time and due diligence.
Pay Attention to Your Credit Score
You may have heard this before but it is so important that it bears repeating: show some attention to your credit score before trying to get approved for a personal loan. Your credit score is crucial in this process, and may end up being the deciding factor in whether or not you get approved for the loan you seek. Even if you do get approved, your credit score is going to be key in determining how high of an interest rate you have to pay. So it makes good sense to take some time before you apply and try and get that credit score to go up just as much as you are able to [1].
Estimate How Much You Need and How Much You Can Pay
Before applying for a loan, it is also a good idea to have a strong understanding of just how much you are going to need to borrow. It won’t be very helpful to go to lenders with wild ideas and no firm reasoning behind it. Map out the number you need and how you will use it, so you can answer lenders’ questions straight forward and honestly. And also have a good idea of how much you will be able to pay back toward the loan each month. You need a real working answer for this, one that you will be able to reasonably meet each month. Knowing the answers to these questions is going to make you look like a good loan candidate to lenders.
Get Prequalified
Prequalification is a process in which you go to potential lenders and have them look at your financials briefly, to get you through the application process more quickly. This is beneficial for a couple of reasons. First, it will expedite your process and make you look more attractive to the lenders you ultimately apply to. After all, if a financial institution has already put their support behind you, that must mean something, right? And second, the prequalification process ends with some sample terms being provided to you. This is the first step in seeing what sorts of rates and fees you will receive, and is going to help you understand better if you can handle the payment structure and let you see which lenders will be most favorable to go with [2].
Compare Terms from Multiple Lenders
Now that you have been prequalified and you’ve seen some sample terms, it is time to compare. You don’t want to just take the first offer made to you. After all, this choice will have a big impact on your financial future. Take time to read all the details and look for any hidden fees that might be a part of each contract [3]. You want a good interest rate and a fair payback period. And don’t be afraid to negotiate. If you like one lender in particular but there is a line item in their contract that doesn’t appeal to you, see if they can budge on the matter. This is a two way street and you definitely have some leverage in how things go. Trust your instincts!
Make Your Picks and Apply
Finally it is time to pick a few different lenders and start the formal process of applying. Congrats! You want to choose lenders that are honest and forthright, who don’t mess about and who aren’t trying to pull a bait and switch on you. For the application process you will likely need a few simple things, like identification and social security card, as well as financial documents for savings accounts, mortgages, and any 401k you may have. Then it’s just time to wait for a reply. Of course, you have done your homework and set yourself up for success so you’re sure to get a favorable response!
Concluding Thoughts
Applying for a personal loan may feel like a mountain of a project, but it can seem so much more manageable when you break the process down into simple steps. By doing your research and arming yourself with good financial advice, you are all the more likely to get the loan approval you seek. Take time to diligently go over these steps and have confidence in yourself. This could be just the first step on the road toward the project or venture you seek to achieve with this loan. Roll up your sleeves and get started!