Personal loans can be used for a number of reasons—home improvement, debt consolidation, paying off credit cards, medical expenses, small business help and more—and there is plenty to consider when preparing to move forward. By following our simple tips, you will have all of the info you need to move forward in the personal loan process with confidence.
(more…)Step 1: Review Your Credit Report
Your credit report is going to be crucial in the personal loan process, so it makes sense to look it over before you get started. The better your credit history, the better terms you are likely to get in a loan agreement, but that doesn’t mean you have to worry if your credit isn’t perfect. Everyone has to start somewhere. In fact, now might be a good time to take steps to improve your credit report. But either way, you don’t want to go into the process blind. Check your credit report with the federal credit bureaus, so you know where you stand.
Step 2: Determine How Much Money You Need
The next step might sound obvious, but it’s something some people fail to give time to. You must determine how much money you need to borrow. If you are talking to a lender and you don’t have a real idea of how much money you’ll need for your intended goal, your negotiating leverage is going to be slim. Put pen to paper and map out your goals, leaving room for any unforeseen problems. One key thing to keep in mind is you don’t want to borrow anymore than what you need. You are taking on debt, and you don’t want to make the hole any bigger than is necessary [1].
Step 3: Gather The Necessary Documents
Applying for a loan is going to require a lot of paperwork, and it makes sense to start getting those items in order now, in an aim to streamline the process later. Be prepared to pull out whatever your lender needs, but we’ve put together here a good list of the things you can expect to need [2].
-Personal data like date of birth, Social Security number, citizenship status, proof of address
-Employment status and employer contact info, gross monthly income, monthly mortgage or rent
– Loan purpose, desired terms, loan amount, preferred payment due date
-Additional documents might include: pays stubs, W2s, tax forms; utility bills; copy of driver’s license or social security card
Keep in mind, this list is not exhaustive, so be prepared to be cooperative. Just stay organized and patient, the clerical aspect of a personal loan application is straight forward but can often prove to be very detail oriented.
Step 4: Consider The Terms You Want
When it comes to applying for a personal loan, it’s not all about what the lender has to say. You need to consider what terms you are hoping for, as well. Think about things like how much you can afford to pay back each month, and how long you would like to take to pay back the loan. Bear in mind that a longer payback period often results in a lower interest rate. Do some math on the matter to discover your ideal terms. You can then use this data in negotiations with the lender. Terms aren’t set in stone, and there is definitely room to negotiate, especially if you shop around. You should definitely plan to cost compare and speak to more than one lender, so that you can see what offers are out there and determine which one would work best for you needs. Remember, you do not have to accept the first offer made to you. In fact, in a lot of cases, you definitely shouldn’t.
Step 5: Actually Start Talking To Lenders
Once you’ve done your homework, it’s time to set up an appointment to speak to actually lenders [3]. Look at banks and other lenders that meet the specifications you’ve put together, then call up local branches to set up the appointments. Be prepared with a list of questions and the paperwork you’ve pulled together—knowing what you are looking for in a lender is a big part of the battle. And actually meeting with and speaking to the lenders will give you a better sense of who you want to go with. But take care to read all contracts carefully before signing on the dotted line. Understand any annual or upfront fees you will be expected to pay, as well as the interest rates and when you will be expected to make your payments each month.
Final Thoughts
It can be a big decision to take out a personal loan, and not one that should be taken without careful thought. However, it doesn’t have to be an overly stressful situation, either. Take some time to go through our checklist to set your mind at ease. Know how much you want to take out, work on your credit report, and gather your paperwork. Then set up those appointments and be armed with your list of questions. Trust yourself in this process and do your research—the right lender is out there for you, for sure. This is the type of financial move that can set you up for success in the long run, helping you with a number of different kinds of financial situations. It’s all about being prepared, and approaching the moment with the right mindset and perspective.
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