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Preparing to Apply for a Personal Loan

Be it for a sudden expense, to cover a big purchase, or to get through a rough patch, there are times in life when a person needs a personal loan to tide them over. Before the application stage, though, you must take certain steps to avoid unpleasant surprises. With that in mind,here’s what you should know about preparing to apply for a personal loan.

Gather Necessary Documents

Whatever kind of loan you apply for, you’ll likely need basics including:

  • Personal identification, such as a driver license, passport, state-registered ID
  • Proof of income, such as paystubs, tax returns, or W-2 forms
  • Proof of resident, such as a lease agreement or utility bill that includes your name and address
  • Employer info, including your supervisor’s name and phone number or email address

Determine Whether You Can Pay the Loan Off

Sure, the lender will do this, but you must do your own calculations beforehand. You certainly want to make sure you’re able to repay what you borrow. That starts with figuring out how you need, then using a loan calculator to give you an idea of what your payment will be. No, you don’t yet know what kind of rates and terms you’ll get, but you’ll be able to ballpark it.

Look at Your Credit Reports

You can gain a decent idea of your loan prospects by checking your credit reports and scores. Make sure there are no errors that could make the difference between an approval and rejection. If your scoring isn’t quite up to par, take the time, if you can, to improve it. Know that you’ll need at least fair credit – scores of between 580 and 669 – for the best personal loans. A competitive interest rate, though, requires scores of above 670.

Consider a Plan B

Perhaps you have what creditors consider a “thin” credit file, or you haven’t been on your job all that long. Well, you might want to line up a co-signer. If that’s not possible – perhaps the lender doesn’t allow it – you may want to try for a secured loan. For that you’ll need collateral such as a house or vehicle, or CD or savings account. The proviso here, of course, is that if you miss loan payments, your assets can be seized. So, tread carefully.

Figure Out What Kind of Loan You Need

Do you know what kind of loan you want? After all, there are several types of personal loans from which to choose, including home improvement, emergency, credit card refi, and debt consolidation. Some lenders aren’t so strict about how loan funds are used, while others won’t approve you unless the money goes for a certain purpose. Achieve offers a variety of personal loans.

Do Your Research

Instead of stopping at the first offer you get, you should shop around for the best possible interest rates. If you have a good relationship with your bank, start there. Credit unions typically have less-stringent eligibility requirements, and some online lenders specialize in loans to those with bad credit. Many of the latter will even pre-qualify you with a soft credit check, which won’t ding your credit score. Because you don’t want too many hard inquiries on your credit reports, shop around within a 45-day period. That way, hard credit pulls will count as just one.

Decide on a Lender Then Apply

Once you’ve done all the above, begin the application process, which you may be able to complete online, depending on the lender. After supplying documentation – again, specifics are up to the lender – the bank will likely run a soft credit check. That may be followed by a hard check, depending on your status. If approved, be certain to read the loan agreement thoroughly to make sure there are no hidden fees or other pitfalls.

The bottom line is that you will save yourself – and perhaps potential lenders – a whole lot of time by taking some preliminary steps before applying for a personal loan. In fact, diligently going through the process could even save you money, in terms of interest rates.

 

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