Personal loans are invaluable in times of financial emergency. However, regardless of your reason for wanting a loan, it’s important to understand the best way to apply. Loans can be difficult to get since they generally require certain standards to be met.
Increase your chances of getting approval by understanding how the process works and what you can do to ensure that your loan application will be successful.
Top 7 Tips to Know Before Taking Personal Loan
A personal loan is a loan you apply for when you need funds quickly. Since it’s an unsecured loan, it does not require collateral or a mortgage. In other words, it’s your credit report that will determine if you’re eligible or not.
To ensure that your application grants you your loan, take a look here.
1. Improve Your Credit
Part of applying for a loan is managing your debt and maintaining healthy credit. This is part of a long-term process that you can’t necessarily do right away if you need your loan now.
However, it’s a good idea to continually check on your history as you consider applying for a loan in the future. Don’t go around applying for any credit you find available then, since every application will end in a check from your credit institution.
If you have multiple credit cards, you should even close them only in intervals. This can help you maintain a healthy mix of credit that will improve your credit score.
2. Check Your History
Knowing your credit history is an important part of your application. You’re the one who knows how fast you pay your credit obligations if you get everything paid on time, and how your previous payments might affect your current attempts to get a loan.
This is why you should run a check on your credit score. Make sure that it is healthy and that your credit score isn’t suffering from any major problems.
If you have a poor credit score, it’s much less likely that you will be given a loan, or you may get a loan with a much higher interest rate than you wanted.
3. Review Your Application
Before you submit your application, check over everything. Make sure that your bank statements are there, that everything is truthful, and that you’re not stingy with your information. Applications that don’t have their bank statements, for instance, usually get rejected.
Providing the correct information will not only increase your chances of getting your loan approved but will improve your chances of getting it approved quickly too. Before that though, also check your credit score.
This is the most important part of your application since this will determine if you will receive your loan or not. Check that there are no typos or errors. Make any changes that you need to before applying.
4. Borrow More Money
It may sound counter-productive to borrow more money that you will have to pay back in the end anyway. However, there’s a good reason that you might want to consider applying for and accepting loans that are bigger than others.
This is because borrowing more money will lower the interest rate on any personal loan. To put it simply: the more money you borrow, the lower your interest rate will be.
This does depend in some cases on your lender, but because of how some loans are priced, borrowing more money could end up saving you money in the long run. Do remember not to borrow more money than you can afford to feasibly repay though.
You might save some money by borrowing more, but that’s only if you can pay it back.
5. Limit Your Applications
You never want to apply for too many different loans at once. This is because you leave behind checks on your credit history with every loan that you apply for. All lenders can see this when they decide on whether to approve you or not.
If you apply for multiple loans at once, most lenders will think that you’re a credit risk and therefore, refuse your loan.
6. Wait it Out
It might be tempting to just grab the first loan that you come across but don’t simply accept any loan. Shop around first as you compare the annual percentage rate between loans.
This will let you see the real cost of the loan, which includes payable interest and other charges involved, along with when the payments need to be paid.
Your bank might tell you that they’ll offer you competitive and preferential rates since you have an account with them. However, still remember that it’s always possible that you will find a better deal elsewhere.
You may want to check out a loan comparison website to make sure that you’re getting the best terms.
7. Read Everything
Read the small print before signing anything on your prospective loan. Some of the best offers you receive might come with some difficult conditions.
For instance, there might be a loan that has a great rate, but that requires you to have a loyalty card that you need to use within a specific period.
Some banks only offer the best rates to current customers, while others will have specific requirements in your loan that are difficult to fulfill. Make sure that your loan doesn’t have any prepayment penalties either.
Some lenders will charge you more for paying off your loan early, which is why it’s important to read the fine print.
Conclusion
There’s a lot of thought that goes into applying for a personal loan. You may think it’s as easy as applying. However, you have a lot to think about even before you pull up that form and start filling it in.
Make sure your credit history is in as good of a shape as you can get it before you send in your application and follow our tips to help you get the best loan possible after you send it in. With our 7 tips, it’s possible to get your loan in 2018.
