Guide to Personal Loans for First-Time Borrowers
A personal loan is an all-purpose loan borrowed from a financial institution to take care of long-term and short-term financial needs. Personal loans are either secured or unsecured. Similarly, they can be categorized either as long-term or short-term loans. Secured loans requires the borrower to present a collateral to the lender. Most secured loans are offered on long-term basis. On the other hand, unsecured personal loans with monthly payments do not require collateral and are offered for a shorter period. The installment loan repayments depend on the amount borrowed for a given period of time.
Are you Eligible for a Personal Loan?
People with excellent credit, as well as people with bad credit, may be eligible for personal loans. First, eligibility for loans depends on your level of income. The more financially stable you are, the higher the chances of a quick loan approval. You can still get approved for a loan with a lower income, but your loan amount will be significantly less. Secondly, the lender must check your credit rating to determine whether you have defaulted another loan before. This will help in checking your credit worthiness. It is important to remember however, bad credit will not necessarily keep you from getting a loan, you will just have to find a lender that specializes in bad credit personal loans. In extreme cases, a person with very bad credit has few options, but can still be approved for loan, such as online car title loans, pawn loans, and cash loans. Thirdly, your profile is checked to evaluate your repayment ability. If your disposable income is too low, you are likely to have your loan declined. You must prove to the lender that you have the ability to take on an extra debt.
Loan Application Process
You need to pick one reputable personal loan lender. There are several guidelines that lenders have set up. First, the lender will check your credit report. This is usually the main determinant of getting a loan. In fact, you should order a copy of your credit report from a credit bureau before you approach any financial institution. Any negative issues on your report should be repaired. Secondly, the lender will ask for all the necessary documentation to prove your ability and willingness of paying the loan. Thirdly, determine the amount of loan you want to borrow. This involves negotiating with the lender to see if you have the capacity to repay the installments. Once the lender is fully satisfied that you qualify for the installment loan, you will be guided on the paperwork to sign. Lastly, you will be given specific number of days for your loan to be approved or rejected.
The interest charged will be determined by the loan amount and the repayment period. Additionally, rates might differ from one lender to another, and from state to state.
Personal Loan Repayment
Once the loan is approved, the funds will be deposited in the bank account. It is recommended that you repay the loan as agreed with the financial institution. It is also recommended to setup online payment schedules so that you never have a late or missed payment. When you do not default, your credit score improves, and this greatly increases your chances of being approved for other loans, like car loans, or new business loans in the future. If you need financial assistance to take care of an emergency or a personal need, you should consider getting a personal loan. Remember that it is much easier to take care of the good credit you have. If some unfortunate situation, such as an illness or job loss occurs and you cannot make your payments, it is very important to contact the lender as soon as possible. Many times they are willing to work with you to create a payment plan that you can afford.