Personal loans are a common choice for consumers who don’t have the money or credit available to cover certain expenses. Those who are interested in how to get a personal loan can start the process by gathering some key information.
Before Applying for a Personal Loan
The first thing a consumer should determine is how much money he wants to borrow. It’s wise to borrow as little as possible to pay less interest. He also needs to check his budget to determine what amount he can handle in monthly loan payments.The consumer should request his credit reports with the three credit reporting bureaus, which are Experian, Equifax and TransUnion, if he hasn’t already done so this year. Credit score has the greatest effect on personal loan interest rates, so a high score is necessary to secure a low rate.
Evaluating Lender Options
Banks and credit unions are the traditional option when it comes to personal loans, but there are now quite a few online lenders available. Many banks and credit unions now offer online loan applications, making it easy to shop around.To start comparing lenders, the consumer should see which ones offer an online application with a soft credit check. These are fairly common, and they allow the consumer to see what type of loan terms he can get through a lender without the application affecting his credit score. Once he decides on a lender, he’ll need to go through another application with a hard credit check. A hard credit check can bring down the consumer’s credit score, which is why it’s important that he always checks what type of credit check the lender will run before submitting a preliminary application.Information about a lender’s minimum borrower requirements will be available online and often through the lender’s website. To avoid wasting time, the consumer should look for lenders where he meets the minimum requirements. If he has a high credit score and a stable financial history, he can likely secure a loan through a bank or credit union, which often have stricter requirements. If he has a low to average credit score, there are lenders available that cater to borrowers in that situation.
While application requirements vary from lender to lender, every lender is going to ask for the following information on its personal loan application:
- Full name
- Current address
- Annual income
- Employment information
- Social Security number
Lenders usually require income verification from all applicants in the form of paystubs or bank statements. They may also ask for personal references.
Using a Personal Loan
When evaluating how to get a personal loan, one thing that doesn’t come up is how the consumer intends to use the loan. While the lender will ask about this, its primary concern is whether the borrower will pay the loan back. Once the loan application is approved, the lender deposits the money into the borrower’s bank account, and he's free to do what he wants with it.