A Complete Guide to Getting a Personal Loan From a Bank
Are you in the market for a personal loan?
You’re not alone. In the United States, about 22 percent of people have taken out a personal loan.
It’s easy to see why personal loans are a popular credit product. Whether you’re stuck in a financial jam, need money to finance a vacation, or you’re looking to finance a home renovation project, a personal loan has your back.
However, getting a personal loan from a bank isn’t as easy as walking to an ATM machine and making a withdrawal. There are steps you need to follow and requirements to be met; otherwise, a bank could reject your application.
Read on to learn how to get a personal loan.
Establish the Amount of Money You Need
The average size of a personal loan is about $6,000. However, depending on your creditworthiness, it’s possible to get a personal loan to runs deep into six figures.
Just because you can qualify for a $100K personal loan, though, does it mean you should get it? When you’re applying for a personal loan, the first step is to establish the amount of money you need to borrow. This prevents you from under-borrowing or over-borrowing.
To establish the amount of money you need, look at the purpose of the loan. If you’re planning to finance a vacation, for example, calculate the cost of the vacation. If you’re relying on the loan to finance 100% of the vacation, the cost of the vacation is what you need to borrow.
If you need a personal loan for a home renovation project, the cost of the project should be what you borrow. Perhaps you can add a little more to allow for errors and omissions, but you should borrow significantly more than you need.
Know Your Credit
Banks and other lenders scrutinize a borrower’s credit before making a lending decision. If your credit score doesn’t meet a bank’s requirements, your application could be denied or the bank could charge you higher interest.
Knowing your credit score before applying for a personal loan enables you to establish where you stand. This can help you make important decisions about the next steps. For example, if you find out that your credit is poor, you may decide to hold off on applying for the loan because your chances of being rejected are higher. Making multiple loan applications hurts your credit score.
If your credit is bad or poor, you can also resolve to rebuild it before going in for a personal loan – especially if your need for money isn’t urgent.
To know your credit, request a copy of your credit report from any credit reporting bureau. Be sure to scrutinize it for mistakes since it isn’t uncommon for credit reports to have errors. If you find an error, file a dispute with the credit bureau that issued the report.
Shop Around for Personal Loan Lenders
Almost every retail bank offers personal loans. Your bank (where you have a checking or savings account) might be your preferred lender, but it’s important to shop around and compare rates and other loan terms.
At the end of the day, you want to get a good loan deal. In many cases, this means a low interest rate and a longer repayment period. Do plenty of research and find out what the various banks are offering. There are digital tools that will get you quotes from several banks, so be sure to use them.
You might also want to look beyond traditional banks. There are private lenders, such as Plenti, offering attractive personal loans. A Plenti personal loan can turn out to be just what you needed.
When you’re shopping around, remember to ask about the credit requirements. Knowing your credit score, you’ll be in a position to identify the lenders to approach and the ones to avoid.
Some lenders also offer different types of personal loans. These include wedding loans, vacation loans, home renovation loans, debt consolidation loans, and emergency loans. Since these loans are tailored to a specific need, it’s advisable to consider choosing a lender who offers the specific type of loan you need.
Pick a Lender and Apply
After shopping around, you’ll have all the information you need to pick a suitable lender.
Once that’s done, you’re ready to proceed and make an application. You can contact the lender and gather more information about their specific application requirements and the approval timelines. If you’re looking for an emergency personal loan, you want a lender that can review the application and render a decision in a matter of hours.
Application requirements can vary from lender to lender, but in general, you’ll need to submit identification documentation. Employment documentation may also be needed if your lender needs you to provide proof of income.
Also, depending on your creditworthiness, you might need to get a cosigner. This is a person whose credit is in good standing and who can vouch for you. This increases your chances of getting approved, but keep in mind that if you get approved and you default on the loan, the cosigner will be required to step in and make the payments.
Most personal loans are unsecured, but some lenders offer secured personal loans. If you’re applying for a secured loan, you’ll need to submit collateral with a market value that’s equal to or greater than the amount you’re looking to borrow. This can be a car, house, or machinery that’s in your name.
Finally, submit the application and wait for the decision of the bank.
Getting a Personal Loan from a Bank Made Easy
Getting a personal loan from a bank is a sound decision. Banks offer friendlier loan terms compared to other lenders. However, there’s no guarantee that your application will be approved. With this personal loan advice, you now know the steps you can take to improve your chances of being approved.
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