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Personal Loans and Tips for Getting One

If you plan to borrow money to address a financial need, you might look into applying for a personal loan. To get this kind of loan, there will usually be no collateral needed. But definitely, you will have to look into a few things before taking any step.

Credit Score

With a strong credit score, you have a better chance of qualifying for a personal loan and getting a lower interest rate. If yours isn’t exactly stellar, do something to improve it before you apply. First off, you’ll have to start making on-time payments and spending under your credit limits. Request a free credit report as well and review it, making sure any errors are disputed.

Loan Prequalification

Loan prequalification will let you take a peek into the possible offers you might get. In most cases, an online lender will do a soft credit check when prequalifying an applicant, a process that will have no impact your credit score so go for it early on. At prequalification, you will be required to supply some basic information such as your income source, employer background, Social Security number, and so on.

Fine Print

As with any other type of financing, a personal loan has terms and conditions tied to it. In particular, look out for prepayment penalties, a surprise APR (this figure should reflect the entire cost of your loan, meaning all costs included, and automatic withdrawals (to avoid overdraft fees, set up a low balance alert with your bank. Look for a lender that also offers flexible payment features, forwards payments to your creditors (if you’re consolidating debt), and actually reports payments to the credit bureaus.

Submitting a Personal Loan Application

Once you have compared a number of loan providers, you can pick one that is most suitable to your needs and preferences. The key requirements you will be asked for include proof of income (bank statements, W-2 forms, etc.), identification (state ID, driver’s license, etc.) and verification of address (lease contract, utility bill, etc.). The lender will also do a hard credit check, which will affect your credit scores a bit. Provided all needed documentation is in place and you actually meet the bank’s or lender’s requirements, the funds will likely be forwarded to your account in a week’s time.

A personal loan can help you during financial difficulty, but make sure you review your options thoroughly before making a choice. Hunt for the best rates, don’t borrow more than you actually need, and be conscientious when making your payments. And remember, make comparisons because this is the only way to know which option is best.

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