How to Get a Personal Loan: A Comprehensive Guide
Personal loans can be a great way to cover expenses, consolidate debt, or finance a big purchase. But how to get a personal loan? And how long does it take to do so and what are the requirements for getting approved?
In this article, we’ll explore the answers to these questions and many more you likely have. We will also include some tips for getting approved quickly with good or bad credit. So let’s immediately dive into the steps you should need to follow.
Step 1: Determine your needs and how much you need to borrow
Before you actually take time and fill out an application form, it’s important to have a clear idea of why you need the money and how much you need to borrow. Some common reasons for taking out a personal loan are for consolidating high-interest debt, usually the one from credit cards. Another one is for covering unexpected expenses such as medical bills or car repairs, which can put a lot of strain on your finances.
The third reason is for making a large purchase, like a home renovation or a new car, and you just prefer getting out a personal loan rather than loans that are specifically designed for those purposes.
Once you’ve determined why you need the money, you’ll want to figure out the exact amount you need to borrow. We advise you to consider factors like:
- The total cost of the expense you’re trying to cover
- Any fees or interest associated with the loan
- Your ability to make the monthly payments
Once you’ve determined how much you need to borrow, you can start looking for lenders that offer personal loans in that amount.
Step 2: Check your credit score
Your credit score plays a big role in whether you’ll be approved for a personal loan, as well as the interest rate you’ll be charged if you are approved. Before you apply for a loan, it’s a good idea to check your credit score and make sure it’s accurate.
In case you are unfamiliar, you can actually get a free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once per year. Review your report and look for any errors or inaccuracies. If you find any, you’ll want to dispute them with the credit bureau to have them corrected. By doing this you can actually improve your score quite a bit so it can be very well worth it.
Step 3: Research lenders and compare loan offers
Once you know how much you need to borrow and have checked your credit score, it’s time to start shopping around for a personal loan. You can do this by researching lenders online or even asking your friends and family for recommendations. It can also be a good idea to check with your bank or credit union especially if you have a good relationship with them.
When looking into loan offers, compare factors like interest rates, other fees (like origination fees or prepayment penalties), repayment terms (how long you’ll have to pay the loan back), and the total cost of monthly payments.
Be sure to read the fine print carefully and ask any questions you have before you agree to a loan.
Step 4: Gather your documentation and apply for the loan
Once you’ve found a lender you want to work with, you’ll need to apply for the loan. This typically involves filling out an online application and providing documentation like:
- Proof of income (like pay stubs or tax returns)
- Proof of employment
- Bank statements
- Identification (like a driver’s license or passport)
The lender will use this information to determine whether you’re eligible for the loan and what interest rate you’ll be charged. They may also perform a hard credit check, which can temporarily lower your credit score.
Step 5: Wait for approval and receive your funds
After you’ve applied for the loan, the lender will review your application and documentation and let you know if you’ve been approved. This can take anywhere from a few hours to a few weeks, depending on the lender and how much documentation they require.
If you’re approved for the loan, the lender will typically transfer the funds to your bank account within a few days. From there, you can use the money for whatever purpose you desire.
How Long Does It Take To Get A Personal Loan?
As we cannot give you a straightforward answer, we will explain the process a bit better. The amount of time it takes to get a personal loan can vary depending on a number of factors, including the lender you’re working with, your credit score, and the amount of documentation required.
In general, however, it can take anywhere from a few days to a few weeks to get approved and receive your funds. If you’re applying for a personal loan through a traditional bank or credit union, the process may take longer than if you’re applying through an online lender.
Banks and credit unions may require more documentation, such as proof of income and employment, which can slow down the process. Online lenders, on the other hand, may offer faster approval and funding times, as they often have less stringent requirements.
Can I Get A Personal Loan if I Have Bad Credit?
Most simply put, yes, you may be able to get a personal loan even if you have bad credit. However, your options may be more limited and you may be charged a higher interest rate than someone with good credit. Nonetheless, this should not discourage you as there are still plenty of options for you to choose from.
If you have bad credit, it’s best to shop around and compare loan offers from multiple lenders. You may also want to consider working with a lender that specializes in bad credit loans. These lenders may be more willing to work with you and offer more flexible repayment terms.
Tips on Getting Approved For A Personal Loan Fast
In case you need a personal loan fast, there are a few things you can do to increase your chances of getting approved quickly:
- Check your credit score. Before you apply for any loan, it can be really beneficial to check your credit score and make sure it’s accurate. As we already mentioned, be sure to dispute any errors or inaccuracies with the credit bureau, and once they correct them your score will increase.
- Shop around. Don’t apply for a loan with the first lender you come across. Shop around and compare loan offers from multiple lenders to find the best deal. Especially with personal loans, there are so many lenders offering them so there is really no reason for you to settle for an offer that does not really make sense for you or your circumstances.
- Consider a co-signer. If you have bad credit or limited credit history, you may want to consider getting a co-signer for your loan. A co-signer is someone with good credit who agrees to take responsibility for the loan if you’re unable to make the payments. This will give lenders a piece of mind and give you more favorable terms and rates.
- Have all your documentation ready. Make sure you have all the documentation required by the lender ready to go before you apply for the loan. This can speed up the approval process and increase your chances of getting approved quickly. You can usually find all the needed paperwork online.
Is it Possible to Get a Personal Loan With No Credit History?
Another common question people have when it comes to personal loans is if you were able to get them with a little to no credit history. And to answer this, yes, it’s possible to get a personal loan with no previous credit history at all.
However, same as having a lower credit score, your options may be more limited.
Additionally, you may also be charged a higher interest rate as lenders are unsure about your ability to afford this type of financial commitment.
In case you have no credit history, you may want to consider getting a secured personal loan. A secured loan requires you to put up collateral, such as a car or savings account, in order to get approved. This reduces the lender’s risk and may make them more willing to approve your loan.
Getting a personal loan can be a great way to get the money you need for a big purchase or to consolidate debt. However, the process of getting approved and receiving your funds can take time, especially if you have bad credit or no credit history.
By shopping around, checking your credit score, and having all your documentation ready, you can increase your chances of getting approved quickly and getting the money you need.
As this is still a big financial commitment we do advise you to speak to a financial advisor, especially if you haven’t taken out a loan in the past.
What Is An Origination Fee?
This fee covers costs associated with processing applications including background checks, credit reports, and things like that. It can range from 1% up to several percentages of the loan amount.
What Is APR?
The Annual Percentage Rate (APR) is the interest rate charged on a loan over its lifetime. It includes all fees and charges associated with borrowing money.
How Can I Calculate My Monthly Payments For A Personal Loan?
You can use an online personal loan calculator to input your desired amount borrowed, interest rates, and repayment terms. This will give you an estimate of what monthly payments would look like based on those inputs.