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Important Things to Look Out For When Getting a Personal Loan

A personal loan can be a life-changing thing for you and your family. It can allow you to start a business, plan a wedding from your dreams, settle a debt and anything in between that requires money you don’t have at the moment. But how can you get this loan and what sort of tricks to avoid? If this is your first time asking for a personal loan, here are a few things to keep in mind:

Who can apply?

Firstly, you need to see whether you can even start considering a personal loan. In most cases, people need to be at least 18 years old to get a personal loan and have citizenship or be permanent residents of the country of the bank. There are also certain income requirements you have to meet and receive regular income over a certain period of time. It also helps to have proof that you’re financially responsible and have a good credit score to help the bank make a positive decision. In case your income can’t support the monthly payments, you won’t be approved, so make sure the amount you want reflects your income and ability to return the money.

Secured vs unsecured loan

There are many types of loans but you mainly need to know the difference between a secured and unsecured loan. A secured loan will require that you have a guarantee, a car is a good example, that will ensure the money you’re borrowing. In many cases, if you get a secured loan, you might expect lower interest rates. On the other hand, an unsecured loan will be approved based on your ability to pay the money back instead of relying on security assets—these loans usually come with higher interest rates.

How to apply?

Today, there are many ways to apply for a personal loan—you can go to your nearest bank branch, complete an application over the phone or even do everything online. If you choose to do it online, it usually takes only a few minutes to fill an application.

How long do you have to wait to get the money?

Usually, you can expect to get your money very quickly, within a few business days. In some cases, people who apply for the fast personal loans online can even get their money in minutes, as soon as you review and sign your loan contract. From applying to getting your money, it can take as little as 60 minutes—with the right lender on your side, of course.

How to make things go faster?

If you want to speed up the process of getting approved for a personal loan, it’s best to be prepared. In most cases, the bank or the lender will require that you have some proof of income like recent payslips, financial statements, tax returns, tax notices of assessment issued by your country’s taxation body, salary details and other income source details. It’s also necessary to prepare your bank statements that contain all your activity and transactions, as well as your savings, loans, and credit card statements with all financial institutions. Naturally, it’s important to provide your lender with personal identification with a photo (ID card, passport, driver’s license, firearm license, proof of age card, etc.). In many cases, you might need to verify your address by providing utility bill examples or your lease, and also provide information about your employment.

Details on your liabilities are also necessary so the bank can run a credit check and establish whether you have good standings. This step might include details on your accounts, accrued wages, payable debt, income taxes payable, debts you will need to repay in the upcoming years, etc.

Minimize the impact of inquiries

When applying for a personal loan and the lender takes your credit report to review it, your report will receive a hard inquiry mark. These hard inquiries will stay on your credit report for some time (depending on your country). If you have too many inquiries in a short term, this can negatively affect your credit score. To avoid that, you can ask your lender to prescreen or preapprove you for a loan offer, which is a process that doesn’t count as a hard inquiry and doesn’t affect your credit score.

Loans and credit score

Any type of credit you take out, which includes a personal loan, needs to be managed carefully. When managed well, a personal loan can be very helpful, even in situations like starting a business or buying a house, but any debt you take on should be considered with care and after careful examination of your overall financial situation before you take the plunge. Before you make any decisions, check your credit report. This will help you understand your current credit situation and show you how your decisions affect your score today and in the future.

If you consider the requirements above, you will be perfectly prepared to apply for a personal loan and get your approval quickly and effortlessly.

Business Daily Media