Personal loans are an incredibly powerful resource for the people who need them most. Not only do they have the ability to allow people in dire financial straits to get on the road to recovery, they can allow people to enjoy some much needed luxury, whether it’s through a vacation or to improve their home. Personal loans are very accessible for many people, whether you have stellar credit scores or not. You should always keep in mind what a loan can do for you, regardless if you plan to pursue one or not. After all – you should never dismiss a resource that can help you. If you’ve decided that a personal loan is the right decision for your circumstances, and you’re ready to start taking the steps to get one, you may have no idea where to begin. With the plethora of information available on the web, it can be hard to sort the credible information from the shady, if not downright criminal. This guide will help serve as your road map to preparing yourself to pursue a personal loan. In the following discussion, we’ll take a look at the different factors you’ll need to consider, and offer some best practices, to help you find a great loan that will help you meet all of your goals.
Gather the Documentation
No matter what lender you ultimately go with, there is some documentation that every single one of them will require, so you can knock out this very easy task right up front. Though there may be specific documents or information that different lenders will need, in general, you should have the following pieces compiled and ready for when you visit a lender:
A Valid Form of ID
Different lenders may accept different forms of ID, but regardless, be prepared to prove you are who you say you are. Lenders ask for this to prevent identity theft, as well as to check for any outstanding criminal charges, and verify your financial data. Common examples include a driver’s license, passport, or potentially, a birth certificate.
Proof of Residency
In order to both help validate your identity, and determine where to find you if needed, your lender may ask for proof of residency. This could include the deed to a home or a utility bill to your current address.
Proof of Employment or Income
No lender is going to work with you if they can’t validate you have assets to pay back the loan, so be prepared to show that you’re employed, or that you have a sizeable enough cash reserve to easily afford the loan. Examples include a pay stub, work offer letter, or bank statement.
If you plan on having someone as a cosigner on the loan with you, even if it’s your spouse, or someone in the same residence as you, be prepared to present the above documentation for them as well.
Check Your Credit Score
One of the most important numbers you’ll need to know, for the loan you’re pursuing and any future ones, is your credit score. Your credit score will serve as a reference point for lenders as to how trustworthy you’ll be with their money, and whether or not you’re responsible enough to pay it back, on time and in full. You credit score will also be a huge factor in determining how much a lender is willing to extend to you, how long you’ll have to pay it back, and what your interest rate will be. Checking your score is easy enough – you can use one of the three major credit agencies, which will allow you to check your score once a year for free.
Prepare Your Finances
A loan is a serious financial commitment, and you’ll need to ensure your finances are in order to successfully pay it back on time. I’m not saying everything needs to be perfect – after all, you may be using this loan because you’re trying to fix your credit – but you need to check your finances to ensure that you’ll have money set aside to afford your minimum monthly payments on your loan repayment.
Research Terms and Numbers
In order to ensure that you can speak to a lender as intelligently as possible, you need to do some basic research on your end. You don’t need to be a financial expert, but knowing some basic terms will help you immensely. It will help you keep up in the conversation, and ensure that you don’t sign off on a agreement that you don’t fully understand. In addition, know what the common trends are for a person with your income, DTI, and credit score. If you know the average interest rate for your demographic is around 15%, then you’ll know that a lender charging 25% interest may not be the best way to go.
The final step of your preparation process is to compare lenders, and decide whom you want to work with. There are a number of ways you can go about this – you could go by interest rates, by reputation, by reviews, or by getting references. All are viable options, and you should look at several different factors before you make your decision. Regardless of what method you use to select a lender, understand that nothing is perfect, and you won’t get your way in every single facet. You may find a lender that’s willing to offer you a large sum of money, but they’ll charge you a high interest rate to do so. Or, perhaps your lender may be willing to give you a sizable loan, with a low rate, but it may take up to a month before you’ll get your money. These are all important things to think about, and the final decision will rest entirely with you, and will be made based on your circumstances, what you can afford, and what you can live with.