Applying for a Personal Loan
Whether you simply need to cover living expenses while unemployed or pay off debt, a personal loan is a viable option. When you need money fast, you may not ask too many questions when a lender approves your loan application, but you don’t want to make a mistake that will cost you big.
Choosing the Right Loan Lender
Before you start applying for a personal loan, you’ll want to review lenders because there are a few things to consider.
- Fees: Don’t be surprised to see various fees tacked onto your loan. Each additional fee charged by lenders for your personal loan increases the cost of the loan. Between application, origination and prepayment fees, personal loans can get to be expensive. However, not every lender charges fees, so it is possible to keep the cost of the loan affordable.
- Hard/soft inquiry: Applying for a personal loan can result in a hard inquiry, soft inquiry or both. Most lenders will want to see your credit report to determine how much of a risk it would be lending to you. When your credit report is pulled, you’ll see a hard inquiry on your report, which can negatively impact your score. On the other hand, you have some lenders who will perform a soft inquiry or not check your credit at all.
- Funding time: How quickly you need cash can affect which lender you select. Some lenders can get cash to borrowers in a matter of hours, while others will take a matter of days to send the funds. If you need money as soon as possible, some lenders are just not going to be an option.
- Borrowing limits: As you review lenders, you’ll see varying borrowing limits. The minimum and maximum amounts that you can borrow need to be considered when searching for a lender, especially if you don’t want to borrow more or less than you need. Keep in mind that just because you apply for a loan, the lender does not have to approve your application for the amount you requested. Since there are a number of factors that determine how much you can borrow, there is no guarantee that you’ll get approved for a loan or the amount you are requesting.
- Loan term: Lenders will give borrowers weeks, months and years to repay loans. You want to make sure you have enough time to repay your loan, so it is important to consider the loan terms offered by lenders. There will be a set amount that you will pay every month, which will be determined by the lender, but ultimately, only the borrower can decide if making these monthly payments and repaying the loan before the loan term lapses could be a challenge.
- Interest rate: Every lender will charge interest on its personal loans. This is the cost of borrowing money, so in addition to the principal amount that is borrowed, and any fees the lender charges, you’ll pay interest. As with fees, interest can drive up the cost of the loan. However, not only can interest rates vary from lender to lender, interest rates vary from borrower to borrower. The interest rate is determined using a number of factors, including credit score, income, and loan term, so one borrower can easily be charged a higher or lower interest rate than another borrower.
Many people turn to personal loans when they need financial assistance. With so many different lenders existing, you have a lot of choices, which can be overwhelming. You want to make the right decision when you secure a loan, and in order to do so, you need to ensure you know what to expect from lenders.
Having trouble getting approved for a loan due to a low credit score? Contact Credit Absolute for a free credit consultation.