Whether you’re looking to bridge the money gap to fund a world trip, your latest passion project or even pay off medical bills, personal loans can be a valuable tool to covering some expenses.
Getting a personal loan relies on the following factors:
- Having a decent credit score and established credit history
- Getting prequalified
- Picking the best personal loan credit option for you
Sounds easy, right? Sure, but you’ll want to shop around and do your research before choosing the best personal loan for you.
The best personal loans offer vastly more competitive annual percentage rates than credit cards and decent loan amounts with reasonable monthly payments.
They are pretty flexible, too. You can use personal loans for a variety of reasons, from funding home improvements to music lessons. Ultimately, it’s your choice.
Types of Personal Loans
Personal loans can be secured or unsecured, with different rules and restrictions which can make it easier or harder to be approved. Some have fixed interest rates and others have variable interest rates.
Understand the assignment: research first, then apply
To get the best deal on a personal loan, it pays to do your research in advance.
So, what types of personal loans are out there? Let’s find out:
|Type of Personal Loan||What You Need To Know|
|Unsecured||An unsecured personal loan is the most flexible and allows you to take out a loan without having to offer assets to the bank.|
|Secured||Secured personal loans require you to put up some form of collateral or surety, such as a car or even your house. This is all to convince the lender you won’t skip town after taking the loan out.|
How Easy Is It To Get a Personal Loan: The Lowdown
It’s easy to get a personal loan if you meet the lender’s requirements, harder if you don’t. This seems super ⭐ obvious ⭐, but bear in mind that a lot (and we mean a LOT) goes into deciding whether someone will qualify for a personal loan.
If you have excellent credit, you may find it easier to qualify than someone with less than great credit.
It does vary, but smaller loans are typically easier to get. Bigger loans may come with more stringent requirements (you’ll need better credit and a track record of paying your debts on time).
What Do You Need To Qualify For a Personal Loan? The Checklist
You’ll need several different things in place to qualify for a personal loan, including:
- A record of paying your bills on time
- Your paperwork in order
- The right mix of credit and debt-to-income (DTI) ratio
Your DTI measures your monthly debts against your monthly income. This gives lenders a sense of how much additional debt you can handle. Ideally, you should aim for a DTI of 36%, though lenders will consider a DTI of up to 50%, depending on the circumstances.
Generally speaking, borrowers who demonstrate a track record of meeting their financial obligations are in a great position to take advantage of the best rates for personal loans.
How To Get Approved For a Personal Loan: The Way
There are several steps you must take to get approved for a personal loan:
Before the application process
Get your papers in order. It’s boring but necessary.
That means compiling your income verification (W2s, or 1099s if you are a freelancer) and other supporting documents, such as:
- Social security card
- Proof of employment (such as pay stubs)
- Cash reserves as well as any required collateral
- Other supporting documents
Also – check your credit report: Clear up any errors or explain any ongoing situations with debt. You’ll be in a good position to get the best rates that way.
During the application process
Fill in the application correctly, and make sure you understand what you’re signing up for! Failing to read the terms and conditions could become a costly mistake.
After the application process
Make your credit a priority even after you’ve applied for a personal loan and are waiting on approval.
It’s tempting to apply for that new points card, right? You shouldn’t, though. Avoid applying for other credit (like other personal loans or credit cards) as it can affect your eligibility for the current loan in that limbo between applying and getting approved.
Also, be extra careful about paying your bills on time to avoid racking up late fees. Late payments WILL hurt your credit score.
When Are Personal Loans Approved: The Result
Typically, personal loans can be approved in a matter of minutes or days, often by the next business day. But the timing does depend on the specific lender and when they do the credit check.
It’s The “Getting a Personal Loan” For Me
If you’ve completed all the above – well done! You should be in a fantastic position to take out a loan as cheaply and as cheerfully as possible.
The Short Version
- A history of on-time payments and a small amount of debt helps with getting a personal loan
- Personal loans can be approved in a matter of minutes – that’s fast!
- To get a personal loan at favorable rates you need good to excellent credit