How do I get a personal loan?
A personal loan is a viable option if you are looking for a way to pay for home improvements, a medical procedure or your child’s wedding. Loans can range from $500 to $100,000, and collateral usually isn’t required to cover them.
Steps to obtaining a personal loan:
• Calculate how much you need.
• Check your credit score and credit report to see whether your credit is good enough for a low rate.
• Shop for rates and requirements at typical banks, but don’t forget online lenders, who often have different requirements from banks.
• Ask the lender whether inquiring about the interest rate on a loan will impact your credit score.
• If you are a young borrower without a track record of borrowing, online lenders are often a better option because they may look at criteria like education and career.
• Once you choose a lender with favorable rates and requirements, contact that lender.
Consumers have a host of places to turn to for their personal loans. Banks and credit unions are a common option and don’t necessarily require a trip to a local branch. Many offer streamlined application processes online. Other types of lenders, such as credit card issuer Discover, also have personal loan programs.
No matter what type of lender you choose, be prepared to go through an application process that’s similar to one there would be for any other type of loan, Pineda says.
That includes a credit check to determine your likelihood of paying back the loan. Generally, a higher credit score translates to a lower interest rate.
The Charlotte Metro Federal Credit Union, for example, also requires 2 recent pay stubs to prove your income and a completed application with personal information, employment information and references, says Nicol Matthews, the North Carolina credit union’s chief operating officer.
The references are used as another way to contact a borrower if he or she becomes delinquent on the loan and can’t be reached at their home or place of employment. Generally, the credit union requires the debt-to-income ratio to be less than 50 percent for personal loans, Matthews says.
Why get a personal loan?
John Ulzheimer, a credit expert formerly with FICO and Equifax, says that even if a consumer says he is using it for one purpose, he can use it any way he wants once approved. The lender just cares that the borrower pays it back.