3 Essential Steps to Getting a Personal Loan: A Guide
A personal loan is a good solution for when you need money to consolidate debt, move to a new country, or finance anything. Whatever the reason, getting a loan is a quick solution to most monetary problems.
Most personal loans are unsecured loans. They don’t require collateral, and loans that amount from $1,000 to $100,000 are commonly paid in fixed payments in a two- to seven-year period.
Here is a short guide to getting a personal loan:
1. Prepare Your Credit Score
You need to have a good credit score to qualify for a personal loan and get the lowest and best interest rates possible. The first step to securing a loan is assessing your creditworthiness or your free credit score. The categories for the scores are detailed below:
Excellent Credit (720 or higher)
Good Credit (690 to 719)
Average Credit (630 to 689)
Bad Credit (300 to 629)
If you want to secure a good interest rate, you need to take measures to build your credit score before applying for a personal loan. One of the biggest determining factors of a credit score is the credit you use and on-time payments.
Take care of any errors that might be dragging down your credit score. It’s easy to request for a free credit report so you can file a dispute for any inaccuracies or reported missing payments.
2. Pre-Qualify for a Loan
When you pre-qualify for a loan, you get a sneak peek into the offers you may be eligible for. Many online lenders perform a soft credit check for pre-qualification, and it doesn’t affect your credit score.
Requesting for a pre-qualification generally requires the following documents:
Loan amount and loan purpose
Income and monthly credit
Personal information like address, email, and phone number
Employer name and address
Date of birth and citizenship
College name and degree
Despite these requirements, some people are denied because they have a low credit score, low income, little to no work history, a more than 40 percent debt-to-income ratio, and too many recent credit inquiries, including credit card applications.
3. Shop Around Lenders
You need to compare your pre-qualified offers with loan amounts, monthly payments, and interest rates from different lenders so you can get the best offer possible. Credit unions may offer lower interest rates with flexible terms, which is beneficial to borrowers with bad credit scores.
If you’re getting a personal loan for an amount equal to $2,500 or less, they’re your best choice. Many large financial institutions, including Citibank, Wells Fargo, and Discover offer unsecured loans, too.
Once you have multiple offers, you can compare those with other credit options. Before you stick to getting a personal loan, you may also want to explore other options, such as a zero percent credit card or a secured loan.
Getting a personal loan can either be easy or difficult, depending on your credit score level. You’ll likely easily qualify for a personal loan without any problem if you have a high credit score. However, if your credit score is 400 or lower, you might have some trouble securing the best interest rates and might want to explore other options, too.
Mid-Town Finance Company BHM offers a wide range of personal loan sizes that fit the needs of every client. We work to review our different options and put clients on affordable payment plans right after approval. Whether you’re looking to build or rebuild credit, consolidate bills, or you’re simply caught in a bind, we try to make the borrowing process quick and easy. If you want to get a hassle-free personal loan in Birmingham, AL, call us today at 205-628-9405!