Most people will apply for multiply loans over the course of their lives to get access to extra cash. A personal loan is an excellent way to get funds you need for various purposes. The funds from a personal loan can be used to consolidate debt and lower your overall monthly expenses, to buy a new car, to pay for holiday expenses or a vacation, to fix up your home and more. If you need extra cash soon and are thinking about applying for a personal loan as a financial solution, follow these steps before you apply for financing.
Review Your Credit Report
Most banks and financial institutions have credit score-driven loan programs. This means that your qualification for the loan in general as well as the specific rate and loan amount you qualify for may be based in large part on your credit score. You can receive a free copy of your credit report from each of the three main reporting bureaus each year, and you can order these reports online today. The three credit reports may each have different scores and information being reported on them, so review all of them carefully. Look for errors or inaccuracies that need to be fixed. In addition, take note of the reasons why your scores may be lower. For example, you may have late payments, or outstanding balances may be too high.
Improve Your Credit Score If Necessary
Most banks and lenders want their borrowers to have at least a 680 credit score for the best scores, but some may be more lenient. You may be hard-pressed to find a lender to extend a personal loan to you if your score is below 600 to 620. Because your score will directly impact your loan amount and payment amount, it is wise to improve your credit score if necessary. Some issues, such as errors on the credit report, can be remedied within a couple of months, and you may see your scores rise substantially in some cases. Simply making a few more monthly payments on time or making more than the required minimum payment can help as well.
Choose the Right Loan Type
There are a wide range of personal loan options available to consider. The primary difference is whether the loan is secured or unsecured. A secured loan means that you have collateral tied to the loan, such as a car, a boat or a house. An unsecured loan is issued on your good financial status. With a secured loan, the lender could repossess the collateral if you fail to make payments on time. However, the interest rate may be lower on secured loans. Consider if you have collateral and if you want to place it at risk as you explore the options available.
Compare Lenders Carefully
After you have decided which type of personal loan you want to apply for, you must then find the right lender to work with. Look for lenders that offer the program you want. Research each lender’s minimum credit score requirements, loan amounts available, terms and interest rate ranges. Then, read consumer reviews posted online. Consider contacting the top few lenders personally to focus on the level of customer service you receive. These basic steps can help you to narrow down your options and make the best decision possible.
Applying for a personal loan is not a process to rush through. The loan amount available must meet your needs for cash, and the payment needs to be affordable. More than that, you want the term to be reasonable so that you are not in debt for an unnecessarily long period of time. By following these important steps, you can more easily get the best deal possible on the loan that is right for your needs and budget.