Applying for a loan can seem intimidating at first glance but it’s not as complicated as you might think. When you need money quickly, there are two main options: borrowing from family or friends (if they’re willing), or getting a personal loan from a bank or credit union.
The first step is to figure out which option is more viable for you. Here are some questions to ask yourself:
Does your family or friend have the money? If they don’t, is there a chance that they can get it in the next month or so?
If not, is it likely that you’ll be able to pay them back within the term of your loan? For example, if you’re borrowing $500, are you able to give them back $50 each month for the next year? If so, this might not be a bad idea.
If either of these answers is “no”, then a personal loan may be the right way to go.
Applying for a loan step by step
Here’s a step-by-step process to take you through the personal loan application process:
First, find an online lender that matches your needs – these days there are plenty of options, so it shouldn’t be too hard.
Pick out a few different lenders and go to their websites. You’ll want to compare rates (APRs) and amounts.
You can also (but don’t have to) fill out their application; this will give you an idea of what your interest rate will be, how long it takes for them to approve loans, etc.
When you decide on a lender, get a rough estimate of how much money they’ll lend you based on your income and your credit history. You can get this estimate by filling out the online application or talking to an actual loan officer over the phone.
Once you decide which one you want, apply for a loan over the internet and/or submit paperwork through the mail. This process will take anywhere from 1 day to 45 days; however, nowadays many lenders are able to determine your creditworthiness within minutes.
Once you have been approved, then you can proceed to actually taking out the loan (the amount that you are approved for is how much they will let you borrow). The most common way of doing this is by getting a cash advance on your bank account, but it’s sometimes possible to take out a loan and receive a check in the mail.
Borrowers can apply for loans directly through lending companies, or they can contact a broker that will help them get the best loan possible. If you go to the company directly, it’s important to have all of your financial information ready so you can complete your application quickly and accurately.
What do you need to apply for a personal loan?
Lenders usually require borrowers to have a good credit score, stable income and equity in their home. They also want to know the borrower’s debt-to-income ratio is below a certain ratio (most commonly 43%).
If they meet these qualifications, the lender will then look at other factors including whether or not the borrower has a high risk of defaulting on the loan.
In addition, the borrower will also need to provide information on their employment status and length of time at a current job. Some lenders may require a letter from employer stating the applicants status as an employee.
Some lenders may have additional requirements such as an appraisal for a mortgage loan. Lenders are also more likely to grant loans if you’re willing to pay higher interest rates, provide collateral like stocks or real estate and agree to automatic withdrawals from your bank account every month until you repay your debt.
Should I file an application for a personal loan?
Sometimes, there are downsides to getting a personal loan.
The most obvious downside is the fact that you’ll be paying interest on your debt. Interest rates can vary widely depending on the type of lender and what kind of loan you’re looking for, but they average between 6% and 30%. So if you borrow $5,000 at 10%, then expect to pay back $6,500 over time with interest.
Another problem is that some lenders require borrowers to have collateral in order to get approved for a personal loan; this could mean selling off stocks or real estate or putting down cash as an initial deposit before being able to take out a loan. If you don’t have anything liquid like these assets lying around, then it may be hard for you to qualify.
You should also take into consideration that if you don’t pay off the loan on time, or if there’s a default on your part, then you may never see any of the money that was originally in those assets (stocks, real estate, etc.).
Finally, with personal loans comes responsibility and accountability. When you borrow money from a bank, they help keep you on track and guide you through the process of paying back your debt. If you ask for a loan online or directly from a lender, then it’s up to you to develop good payment habits and be responsible with the use of that money.