Did you know the average adult in America has a personal debt of $58,604? From medical bills, car loans, and college tuition, Americans have a lot of bills to pay.
Many people turn to personal loans as a solution for unexpected expenses that come up. However, not everyone knows the ins and outs of applying for a loan online.
Knowing the essential tips to follow can save you a lot of trouble and ensure that you’ll get the type of personal loan you really need.
Keep reading this guide to learn five helpful tips for getting a personal loan so you can get started today.
Credit scores are a rating usually between 300 and 900, representing your credit risk and letting lenders know how likely you are to pay your bills on time.
The higher your credit score, the better your chance of qualifying for an online personal loan. In addition, you’ll usually get a better interest rate if you have a higher credit score.
It’s in your best interest to assess your credit score before applying for a personal loan to make the necessary improvements.
The ranges for credit scores vary, depending on the credit scoring model your lender uses. However, your credit score will typically fall into one of these categories:
If your credit score is in the lower range, your first step is to request a free report from all the major credit bureaus. You’ll need to check your credit report for any errors that may negatively impact your credit score.
If you have significant errors on your credit report, your credit score may go up once you make these corrections.
You’ll also want to evaluate your debts and see what you can pay off before you apply for a loan. You can learn more tips here on improving your credit score.
Getting prequalified for personal loans online gives you a good idea of the types of offers you might receive from different lenders.
To get prequalified, you’ll have to provide personal information to the lender, such as your name, date of birth, annual income, and the reason why you want to take out the loan.
The great thing about getting prequalified is that it only results in a soft check on your credit score. Soft checks are simply checks to your credit to see if you’re likely to qualify for a loan and have no impact on your credit score. In fact, when you check your own credit score, it’s considered a soft check.
In contrast, hard checks require your consent and are done by lenders who plan to extend credit to you. These types of checks can reduce your credit score by 5-10 points and remain on your credit record for approximately two years.
Keep in mind lenders who don’t offer pre-qualification for loans will usually run a hard check on your credit, so you’ll want to limit this as much as possible.
Once you’re prequalified for a few different online personal loans, you’ll want to compare lenders and shop around for the best possible rates. Don’t settle for the first offer you receive right out of the gate.
A good idea is to make a chart of each online lender you’re considering. You’ll first want to write down the annual percentage rate (APR) for each of them. The APR is the interest rate plus the loan fees, so you’ll get a solid picture of how much your loan will actually cost.
Next, make a note if the interest rate is fixed or variable. Fixed rates will stay the same during your loan term, and variable rates will change and sometimes increase.
You’ll also want to check other things like:
While personal loans are a great option to cover expenses, you’ll need to be careful not to borrow too much.
Before you take out a loan, you must budget carefully to ensure you can afford the monthly payments required for the loan term. Most lenders won’t accept partial payments, and you’ll be subjected to late fees and penalties.
Even worse, it will have a negative impact on your credit score and limit your ability to secure loans in the future.
Also, figure out the absolute minimum you can borrow and still get what you need. Be careful not to overstate your income and be realistic about your financial situation.
It’s all too easy to find yourself in a difficult financial situation where you panic and start applying for multiple loans wherever possible.
As a result, you end up with multiple loan payments that are due each month, and you’re not able to make the payments.
So, if you find yourself applying for multiple loans in a panic, take a step back and look at your finances. This in itself indicates you have significant financial issues, and taking out too many loans will only make things worse.
Instead, take one personal loan out and devise a solid plan for your financial situation. One thing you can do is meet with a credit counselor. Credit counselors will go through your debts and come up with an affordable payment plan for you. They’ll also negotiate a payment plan with your creditors.
Many online lenders offer personal loans at competitive interest rates, so applying for a loan online often goes much smoother than you think it will.
You can use these tips to start your search and make sure to take your time to research your options thoroughly.
A great place to turn for your personal loan needs is FastLoanDirect. We provide solid solutions for all credit scores and can help you find the best personal loans online for your situation.
We offer loans from $100 to $35,000, with APR rates starting at just 5.99%. We can connect you with a variety of loan providers within minutes, so visit us today to get started!