Instead of spending hours sitting in a bank, you can simply apply for a personal loan online. If you tell that to your grandparents, they’ll be shocked. But more and more banks are offering loan services online. And that’s good news for consumers because you can handle everything from your couch.
But, whether you want to pay a medical bill, school, or you’re getting married, a personal loan would come in real handy because this is the type of loan that doesn’t require too many explanations as to why you are taking it and it’s given unsecured.
Now, when you take out a loan, it is important to note that it shall be repaid plus interest. Interest refers to the cost of the loan, and this is how lenders make their money. They give you a specified time to repay the loan, say, 1 year, or 2 years, or even 20 years as per their rules.
How to Apply for a Personal Loan Online
Identify a Borrower
There are plenty of personal loan lenders with all sorts of requirements. What you want is a company that is extremely flexible with repayments. It should have a low-interest rate, and also a company that is willing to give you advice on what best to do.
When it comes to money, we all need advice, as loans are the gateway path to debts. One of the reasons why need advice is to ensure you don’t jeopardize your future. If you take out too many loans, you may be unable to take out a much-needed loan in the future.
Sure, you want to go on vacation or pay for some bills, but these may not be the best reasons for borrowing a loan, especially if you have a low income. It’d be better to get a loan to expand your portfolio so your income from your portfolio can send you on holiday.
Deciding on How Much You Wish to Borrow
Qualifying for a specific amount of loan depends on a few factors such as your income level and your other existing loans. If you have already exhausted your limit, meaning you already have more than one loan, it is less likely that you will qualify for an additional loan.
Also, if your credit is below the required level, the lenders may be wary when approving you for additional credit.
Be careful with your credit score, as well, meaning that you must always repay what you owe on time. Especially credit card debts because with low credit scores, you are likely to get the highest interest for the loans you qualify for.
A high-interest loan means that you will pay way too much for a little money. And sometimes the cost of the loan may equal the loan you were issued. High credit scores allow you to get loans at the lowest rates.
So, identify how much you need for the task at hand, and do not take out more than needed, as this is money that must be repaid, and it feels so good to pay back money that you spent on a worthy cause, rather than money that was misused.
Check Your Eligibility Before Applying for the Loan
Most lenders have websites and available customer support staff who are always willing to help you. Give them a call and visit their sites to find out what their eligibility requirements are, before you apply, so you don’t end up with a rejected application.
Once you identify a lender that is likely to approve your application, check whether they offer prequalification. This is a simple process that checks whether you qualify for the loan when you apply with a soft credit pull. A soft check does not affect your credit report in any way.
When you finally do apply, they will do a hard credit check that must be included in your credit report and affects your score. However, please note that prequalification is not a surety that you will get the loan. It simply shows that you fit the financial profile of people whom the lender considers good clients.
Applying for the Loan
After narrowing down on the right lender and receiving your pre-approval, then go ahead and apply for the loan.
Here’s a trick: You can apply with multiple lenders, to see who will offer the best rate and amount you want. To do this, ensure you bunch your applications together within a short period of 14-30 days.
This is known as rate shopping, and it will raise multiple inquiries on your report. All of the inquiries will be treated as one and therefore not have much impact on your score.
Remember to read the FINE PRINT on your personal loan contract. Most people don’t do this. And once you sign the contract, you are agreeing to all of their terms and conditions. And in case some issues arise in the future, the lender will be covered by the signed document and you will not.
Note: There are risks involved when applying for and using credit. Consult the bank’s terms and conditions page for more information.