Everything to Know Before Applying for a Personal Loan
In instances where you need to make a big purchase, it could be wise to consider getting a personal loan. As long as you meet all of the necessary requirements, you should be able to get a suitable loan before your purchase.
Here is a quick guide on getting a personal loan, and the basics you need to know.
Do I Need to Keep Track of My Credit Score?
For most lenders, having a good credit score is a contributing factor to the approval of your loan. They will run credit checks to see whether you are capable of paying off any debts on time. If you have a higher credit score, they are more likely to take you on.
The standard for good credit based on your FICO® Score☉would be 670 to 850. Scores of 580 to 669 are still considered reasonable enough scores to qualify for a loan, but you might have fewer chances of getting a lower interest rate compared to those with better credit.
If you have bad credit, you can opt to get a secured personal loan. However, note that you might have to pay higher interest rates and provide collateral for when you don’t pay off your loan on the agreed upon time and terms.
You might also want to consider online lenders or private money lenders, who take consideration for other conditions aside from credit scores.
How Long Will a Personal Loan Take?
The length of the loan process will depend on your affiliated lender. Depending on the institution it could take anywhere from hours to weeks. Consider the urgency of your loan when you are finding lenders to take you on.
For financial institutions like banks and credit unions, you will typically have to follow strict processes. This could involve paperwork and other requirements that need to be preapproved. That said, loans from these lenders could take a longer time compared to taking personal loans from an online lender.
Most online lenders won’t need as many requirements, as they don’t look into your credit score as rigorously as banks do.
What Requirements Are Needed?
When applying for a personal loan, you will need to provide personal information about yourself, such as your address and identification. Make sure you have any government-issued ID on hand. For credit checks, they will also ask you to give your credit report for approval. After which, you might need to provide your bank information next.
Other personal lenders will also ask for your Social Security number, proof of income, and other documentation reflecting your monthly expenses and debt payments. These are all to ensure that you are financially capable of paying back your loan on time.
They might also ask you to provide your debt-to-income ratio (DTI). To calculate this, you will need to determine your monthly gross income, add up your total monthly debt payments, and divide the total monthly debt by your entire gross income.
As a general rule, if you have a high DTI, you are less likely to qualify for a personal loan.
Applying for a personal loan is a delicate process. You need to prove that you are financially capable of taking up this loan and be able to pay it off later. It’s best to remember that having bad credit scores isn’t the end of the world and that some lenders are willing to work around that.
If you’re looking to make personal loans in Memphis, TN, partner up with Magnolia Finance. We provide quick loans for those with straightforward repayment plans. If you have a lower than average credit score, build or rebuild your credit with us! Contact us at 901-381-9095 for more details.