How To Get Approved for Personal Loan?07/11/2019
Something has come up and it requires funds you don’t have. You need money and you need it fast. Where do you turn to? Where do you get a personal loan that can easily get approved? What should you consider when deciding to go for a personal loan?
Getting A Personal Loan
Getting approved for a personal loan is about proving that lenders can entrust their money to you. They need to know you’ll be able to pay them back what they’ll lend you. They want to see your creditworthiness.
Whichever lending institution you go to, whether a bank, credit union or an online loan company, they all will look for a safeguard, offering you their own personal loan qualification requirements, interest rates and fees.
Pre-qualification Pre Approval
The process of proving your creditworthiness starts with a pre-qualification.
Pre-qualification previews what personal loan you’ll probably be getting.
The pre-qualification process starts with filling your form where you share personal information: your income, your occupation and any debt you might have.
The lender takes your personal data and looks at your credit score and credit history, revealing how much of a risk you are as a borrower.
If you are pre-qualified, the lender will inform you of the possible loan amount, its rate and other related details. This does not mean you’re approved. If you accept what they offer, you will then formally apply for the proposed personal loan.
This is the best time to compare different offers from different lenders of their proposed loans, interest rates and other conditions. It’s a good idea to pre-qualify for multiple personal loans at this stage.
Pre-qualifications can range from minutes to days depending on which type of lender you go to. Online lenders pre-qualify the fastest.
Remember, the proposed amount and rate for lending can still change once your application goes through towards approval or rejection.
Pre-qualification or Pre-approval?
Getting through the process of pre-qualification is part of the whole pre-approval process. The terms are interchangeable when it comes to personal loans especially.
Everything that happens before granting approval is all pre-approval and pre-qualification.
Secured or Unsecured Loan
Upon formal application, when you’ve finally submitted your bank statements, your income, your most recent tax returns and other financial documents, one major decision you’ll be making is whether you’re opting for secured personal loans or an unsecured personal loans.
Besides being granted the loan you really need, the decision to make it secured or not affects your interest rate. Secured loans lower interest rate. It covers risks for lenders.
Securing a loan means backing up what you’re borrowing with an asset like your car or your house. It’s a promise you’re making to the lender that, in the event you’re not able to pay back what you borrowed, the asset in exchange will be forfeit instead. It’s called a collateral, an insurance for the lender for his risk lending you.
An asset can be anything that’s of value that the lender can accept in place of his money as a last resort.
You may consider your savings account, certificate of deposit (CD) or any other valuable collectibles as assets to lower the interest rate or fees.
When you’re granted an unsecured personal loan, you don’t need to have a collateral for it. That means in the event you’re not able to pay back the loan, the lender does not have any claim for his compensation. It’s a riskier arrangement for the lender. Personal loans are mostly unsecured loans.
Nevertheless, not paying back the loan will result in the lowering of the borrower’s credit score such that it becomes very difficult to avail of any other types of credit.
You will want to pay back what you borrowed completely according to your agreed contract.
Credit Scores are the most important factor in granting a borrower a personal loan. Credit scores reflect how you manage your debt. Your credit history is reflected on that score - how long you’ve had credit, how often and how much you pay back the balance and how often you use your credit allowance.
Do not use more than 30% of the credit that’s given to you.
Keep your oldest credit accounts working and limit your open credit to two.
It is very important to pay your bills on time, keeping your borrowing very low and clearing your balances every single month.
Banks look at credit scores most particularly. They prefer to lend to borrowers with higher credit scores.
Credit unions are not as stringent with their credit score requirements but it may mean you’ll need to first be a member to qualify.
Online lenders may give you personal loans with lower interest rates but they’re usually limited to certain states that may not be your own.
So, do your research on what’s available and shop around requesting for pre-qualifying lending requirements. Get your financial documents needed. You might just get money today.