Short-term money needs can arise anytime. You may need cash to pay for your wedding, fund your dream vacation, finish off your credit card debt, meet urgent medical expenses etc. If you find yourself in any of these situations and a cash crunch, then you know you can trust the good old personal loan that will help you meet your need without touching your savings.
Personal loans are usually unsecured, which means that you are not required to pledge a collateral such as a car or a house. You can easily take an unsecured personal loan for up to $50,000 and pay it back in simple monthly installments. The rate of interest and loan term will depend on your credit rating.
In this article, we will discuss the basic steps to get a personal loan easily.
Credit Score
First things first, you need to check your credit score to ensure that you qualify for personal loans. If your score is healthy, then you are not only eligible for the loan but also low-interest rate. An excellent score is anything above 720, whereas poor score or bad credit is under 629.
If you notice that your score is not good enough to help you secure a loan, then you should first build up your creditworthiness and then reapply. The biggest reason why your score is taking a hit may be due to delayed payments. If you are on point with your payments and still find that your score is low, then you should request a free report and remove all the errors.
Rebuild your Credit
This is for people who are struggling with poor credit scores. You can start your journey to better credit with paying off all your credit balances. Do you have credit cards with lingering balance? Are you paying the minimum amount only that is due on your credit card? Do you pay your bills on time? There must be something about your payment history that is affecting your credit score. So, start with carefully assessing your credit reports. You are entitled to a free copy from all the three major credit bureaus – Experian, TransUnion, and Equifax. Once you receive your copy, look for errors or wrong entries that can be corrected. Once these items are fixed, you can start your credit restoration with making timely payments and clearing all outstanding debts. Once these are out of the way, you will be eligible for a personal loan.
Get Pre-Approved for Personal Loan
Pre-approved or pre-qualifying for personal loans mean that you can get a quick peek into the loan offers you are eligible for. You will be asked to share personal information such as SSN, income details, workplace details, contact information, educational details etc. Once you provide all the information, the lenders will do a soft-check on their applicants to check eligibility based on their credit profile.
Shop Around a Bit
When you have pre-qualified offers, don’t just go with the first one you come across. You should compare all the options against amount, interest rate, foreclosure, loan terms, repayment options etc. Experts also recommend shopping for loans from a bank or a credit union. The latter is known to offer favorable terms and friendlier interest rates. This is especially helpful for people who have poor credit scores.
Compare All Options
Just because you qualify for unsecured personal loans doesn’t mean it is your best option. You can also explore other alternatives such as 0% credit cards that will give you an interest-free duration to repay for your purchases. If you think you will be able to repay within that time, then using a credit card will be your best option. At the same time, you can also look into taking a secured loan. The interest rates are lower and the payment terms are more flexible when you pledge your equity.
For people who have a bad score and do not qualify for a loan on their own, they can add a cosigner with solid creditworthiness to their profile.
Once you have explored all the options and chosen the one that suits you best, the next step is to carefully read the fine print of your loan offer. Learn about all the penalties such a fee to pay off your loan early.
Don’t be afraid to ask pertinent questions about your loan and acquire all the information before signing the dotted line. Making an informed decision is the best way to ensure that you will repay your loan till the end.
