How To Apply For A Best Personal Loan in 2022

How To Apply For A Personal Loan

To apply for a personal loan, first make sure your credit is as strong as possible. From there, explore lenders that offer personal loans with the features you’re looking for and gather the data you need to submit an application.

You may be able to get an interest rate estimate before you officially apply, depending on the lender. You can also get a decision within minutes of pressing submit. But with so many personal loan options available from both traditional and online lenders, finding one that fits your goals and budget will require some research. Here’s how to do it.

 

1. Check your credit score

Before applying, check your credit score to make sure you meet the minimum credit score requirements. While some lenders share this information publicly, not all do. As a rule of thumb, a safe bet is to have good credit—a score of at least 670; Some lenders offer loans to applicants with fair or bad credit (below 670).

Your credit score helps determine the annual percentage rate (APR) you’re offered and the amount you’re allowed to borrow. Generally, lenders offer the best rates and terms to borrowers with the best credit.

You don’t even have to pay to check your credit score. You can use free credit score websites, or many banks, lenders and credit card issuers now offer free access to scores, even to those who are not active customers or account holders.

Related: Best Alternatives to bad credit loans 2022

Improve your credit score if necessary

If your credit score is less than ideal, there are a few things you can do to improve it before applying for a personal loan:

Correct any credit reporting errors. If you see an error on your credit report, dispute it online with a credit reporting agency. Or, if the credit bureau allows it, you can file a dispute over the phone or by mail. It’s also a good idea to file a separate dispute with the creditor, collection agency or other provider that is reporting your information inaccurately.

Pay off current debt. One way to improve your score quickly is to pay off as much of your credit card balance as possible so that you’re only using a small percentage of your available credit. Ideally, your balance should be less than 30% of your total credit limit for a low credit utilization ratio.

Pay on time. Make sure to track your debt obligations so you don’t miss a payment. Your payment history makes up 35% of your credit score calculation, so on-time payments are a critical component of a good credit score.

2. Pre-qualification for loans by multiple lenders

Many lenders allow you to check your rates and potential terms without making a hard inquiry on your credit report, which can hurt your score for a year.

 

You can use a lender’s prequalification tool to compare offers and gauge how likely you are to get approved for a loan at a competitive rate. Requesting pre-qualification can also help you avoid hard inquiries for loans you don’t qualify for.

When visiting a lender’s website, look for an invitation to submit your information, such as a “Check Your Rate” button. When you fill out the online prequalification form, you’ll be asked about your income and housing payment, how much you want to borrow, how you plan to use the loan, and your ideal loan term. Make sure you have this information handy before you begin.

3. Compare your offers

You are likely to receive the loan terms once you complete the pre-qualification process. If you’ve pre-qualified with multiple loans, it’s important to compare each offer to help you understand the best loan for your situation. In particular, you should compare the following:

Tenure of Loan. The term of your loan is how long you have to repay your loan, usually between two and seven years. Longer loan terms have lower monthly payments but you may incur higher interest over time.

Loan amount. Your loan amount is the amount you can borrow. Make sure to choose a loan that offers you what you need while still being able to afford your repayment obligations.

Monthly payment. Your monthly payment is how much you owe each billing cycle, usually every 30 days. Make sure to choose a loan that offers a payment plan that works for your budget.

Origination fee. Some, but not all, providers charge an origination fee, typically 1% to 8% of the loan amount. You either have to pay this upfront as closing costs or finance it as part of your loan balance. Ideally, you want to find a provider that doesn’t charge any origination fees.

Prepayment penalty. As with origination fees, some providers charge prepayment penalties. This is a fee that lenders charge borrowers who pay off all or some of their loans ahead of schedule. Fees typically start at around 2% of the outstanding principal balance and drop to zero in the first few years of the loan.

Related:Best Alternatives to bad credit loans 2022

4. Complete and submit your application

Once you’ve pre-qualified for a loan, the lender will give you a window of time–potentially several weeks–to proceed with a formal application. The information you will need to complete your application will vary by lender. But you can expect to fill out basic contact information and details that help confirm your identity, such as your Social Security and driver’s license numbers.

 

In addition, you may be asked about yourself:

• Household income
• Employment status, whether you are self-employed or out of work
• Employer and Business
• Your home ownership or rental status
• Monthly rent or mortgage payment
• Home equity if you own a home
• Checking and savings account balances
• Assets and Investments

Once you submit your application online or in person, the lender will check your credit again, this time showing a hard inquiry on your credit report—which can hurt your score by up to five points for a year. The application review process can take a few hours to a few days depending on the lender.

5. Close, manage and pay off your loan

After the lender reviews your application, and if they approve it, you’ll receive final loan documents that outline your loan details, including the interest rate, Personal loan term, loan amount, and monthly payments.

 

Once you sign your Personal loan documents, your lender will usually deposit the funds directly into your bank account. Depending on the specific lender, this can take anywhere from 24 hours to a week; Online lenders usually disburse funds quickly.

This marks the start of your payment terms. To make sure you don’t miss a payment, register for AutoPay or set a calendar reminder. Some lenders offer discounts of up to 0.25% for borrowers who enroll in AutoPay.

How to get a personal loan with bad credit

While it’s not impossible, getting a personal loan with bad credit can be challenging—it will require some extra attention and steps on your part. When preparing to apply for a Personal loan if you discover you have a low credit score, or you are already aware of a bad credit score, consider these tips to improve your chances of approval:

• Add a co-signer if possible. Some, but not all, personal loan lenders allow co-signers. A co-signer is someone who legally agrees to pay the Personal loan if you are late or default on payments. Their credit score is considered during the application process and can help increase your chances of getting a personal loan with bad credit.
• Find a bad credit lender by pre-qualifying. Some lenders offer a pre-qualification process, which lets you see what terms you might receive if you submit a formal application. By prequalifying with multiple lenders, you can find people who accept bad credit borrowers and have loans to offer you.
• Take time to improve your score. To the best of your ability, improve your score before applying. Because payment history accounts for 35% of your FICO score, you can cover a lot by paying off current debt and making future payments on time or early. Also consider other quick credit-building strategies such as becoming an authorized user, opening a secured credit card, requesting a credit limit increase or opening a credit-builder Personal loan.

What loans can a person with bad credit get?

Types of loans for bad credit

• Secured loans. With a secured loan, you’ll have to offer your lender an asset as collateral, like a car, a home or even a savings account. …
• Unsecured loans. …
• Joint personal loans. …
• Payday loans. …
• Cash advances. …
• Bank agreements. …
• Bad credit home equity loans. …
• HELOC loans for bad credit.

Personal loans for bad credit

The minimum required credit score for a personal loan depends on the individual lender, so evaluate individual lender requirements before applying. If you struggle with your credit and are looking for a personal loan, there are bad credit personal loans available. These loans tend to have more flexible requirements, and lenders weigh a borrower’s entire financial history with less focus on credit scores.

If you are looking to take out a personal loan with less than stellar credit, there are many things to consider. The lower your credit score is, the higher the interest rate on your loan is likely to be. Because a lower credit score means more risk for the lender, the terms of your loan are likely to be less flexible than a borrower with a higher credit score.

Make sure that the loan terms you qualify for will work for you, and that you will be able to comfortably pay back the loan. Borrowers should also look out for predatory lending by verifying a lender’s credentials before applying.

How to Avoid Rejection of Personal loan Applications?

The approval of a personal loan application depends on many factors. When you apply for a loan, you should make sure that you are fulfilling all the factors to ensure the approval of your loan application. The eligibility criteria for personal loans may vary from lender to lender. However, there are some common criteria which include the age of the applicant, his or her income, credit score, the status of employment, and so on.

Before you apply for a loan, make sure that all the eligibility criteria are being fulfilled. This will help you avoid the rejection of your loan application. Although there are other options that you can resort to in case your loan application gets rejected, it is recommended to double-check before applying to avoid the chances of rejection of loan application.

How to Check Personal Loan Status?

There are two main modes of checking the status of your loan application. Most lenders offer both online and offline modes through which you can keep tracking your loan status.

Online Mode:

Most lenders offer the option of logging in to their official portal to help you track the status of your loan application. You can use the application number or reference number which is issued by the lender for this purpose. On the other hand, if you have applied for a loan through a third-party aggregator website such as BankBazaar, you can just log in to its web portal and track the status of your loan application directly.

Offline Mode:

If you are not comfortable using the online platform, you can also track the status of your personal loan application through offline means. You can visit the branch office of your loan provider and check the status of your loan application. On the other hand, you can also connect with your lender over the telephone through their helpline or customer care number.

For both these methods, you would be required to provide a few basic details such as your name and the application number or reference number. Head to BankBazaar to know more about how to track your personal loan status.

How to Get Personal Loan Statement?

You can easily get in touch with your lender either through their online web portal or in person and request your loan statement. On most lender websites, you can just log in using your online credentials and provide your loan account number. Once you have tracked your account, you can request a statement which is either sent to your registered email ID or provided in the form of a PDF file which can be downloaded.

Similarly, you can also visit the branch office of the lender from where you have availed the loan and place a request for a statement. In addition to that, you can raise a request for your personal loan statement through phone banking as well.

Tips for Successful Personal Loan Application

There are a few important things to keep in mind when searching for a personal loan. Check out list of most helpful tips that will certainly help you with your personal loans.

• Assess the need for your loan
• Do proper research to get the best rate
• Check your credit history
• Review the fine print on your loan document carefully
• Choose your loan tenure by assessing your repayment ability
• Choose an affordable interest rate
• Select your loan amount as per your convenience
• Check your EMIs properly
• Compare the processing fee
• Select fixed or variable interest rate according to your preference

Things to do after personal loan closure

If you have recently paid off (either paid off or closed off) your personal loan, you may realize that your obligation to the loan is over. However, that is not the case. There are certain things that you should do after paying off your personal loan.

No Debt Certificate (NDC): A No Debt Certificate (NDC) is issued by your lender once you pay off the debt. This is one of the most important documents that you should collect immediately after paying off your loan. It is also a wise decision to retain this document for a long time. This certificate validates the payment you have made. Without this document, you cannot prove that you have paid your debts.

If you are keen to take another loan in the near future, you will need this document to prove that your previous loan has been repaid. Generally, this document is issued by your lender on the spot if you are paying the final amount through hard cash. If you are paying by check or NEFT or any other means, the lender will issue an NDC and either send it to your registered address or ask you to collect it from the lender’s branch office.

Statement of Account (SoA): A Statement of Account or SoA, along with NDC, will help you prove that your debt is fully paid and paid on time. This is an optional document often issued by some lenders. If your lender provides this document, you should consider getting it. However, you should also look for any discrepancies in the credit score. If you find something wrong, you can use SoA to make necessary changes to it.

Collection of unused cheques: If you have some check leaves which are not used, you should also collect them. Collection of No Dues Certificates and unused check leaves usually mark the end of the loan closing process.
Check your credit score after closing the loan: This is just a recommendation. It is not mandatory to check the credit score after the closing process is over.

However, it is recommended that you check the score to ensure that there is no difference in the score. If there is some possibility of you getting another loan within 1 to 2 years of closing the current loan, it is recommended that you check the credit score immediately after closing the loan.

Disbursement of personal loans

Personal loan disbursement is basically the process of sending the loan amount to the customer’s bank account by the financial lender. The loan is disbursed after submission of relevant documents of the customer and verification and approval of the financial lender. Financial lenders offer personal loan disbursement within seconds, while others take a few hours to a few days to disburse the loan amount after approval.

How do I repay my personal loan?

There are many ways through which you can repay your loan. This includes:

• By Electronic Funds Transfer (EFT).
• by check
• By paying physically at the lender’s branch
• By standing notice for automatic deduction from your account