Check Your Credit Score
Checking your credit score is absolutely crucial when it comes to getting a personal loan, because you will get an idea as to whether you can even qualify for the loan. The lender will certainly check your credit score, and certainly has a minimum level for qualifying and underwriting a loan.
If you know your credit score ahead of time, you can get an idea as to how likely you are to get financed, saving you a lot of time. Beyond that, you can also look at problems with your credit, and clean them up to make yourself a more viable candidate for financing.
Don't worry if your credit is lower than you thought, there are ways to improve your credit score.
It’s Possible to Get Prequalified
Many people don’t think of this ahead of time, but it’s possible to get pre-qualified for a loan online. This gives you an idea as to what may be possible before you even require a loan. Most online lenders can do, what is known as, a “soft credit check”, meaning that it won’t affect your credit score.
You can provide some personal information to various online lenders or even to the bank to see what type of interest rate you could qualify for, and of course how much money. This gives you an idea as to your situation financially. Beyond that, it also can give you a bit of financial security knowing that if a problem or major issue does arise, you will have that money available.
Make Sure to Shop Around
Make sure you shop around for your loan, as the rates and amounts can be drastically different from one lender to another. Quite often, you will see that smaller loans are better to be taken out at credit unions, while a larger loan may need to be taken from a larger institution, such as a bank.
There are significant interest rate differences between these lenders, which are always changing. Because of this, make sure that you compare personal loans and, of course, the amount of interest that you will pay.
Remember, personal loans tend to be somewhat expensive, and you can often see as much as a 10% difference on the APR (annual percentage rate). Use our simple APR calculator to see how this can impact your monthly payments.
This makes the shopping around for these loans vital. The amount that you could overpay could be hundreds, if not thousands of dollars.
Remember, There Are Other Options As Well
Getting a personal loan is not your only option. For example, if you qualify for a 0% APR credit card, it’s likely that the credit card may help you more than a personal loan. It’s a matter of how much credit you are offered, and whether or not it is enough to finance your situation.
There are also other options, such as considering a secured loan, putting up your house or car as collateral. However, this can be dangerous in the sense that if you do not pay the loan off, you could find yourself losing a valuable asset. Although a possibility, this is probably one of the last options you should explore.
Another option is to add a co-signer, which needs to be approached with caution. Personal relationships can be strained, if not destroyed, by doing this if things go wrong, so keep this in mind. Make sure that you can pay the loan off if you use this option, because if not, not only you will suffer from default, the cosigner will as well.
Make Sure to Read All the Terms
Make sure you that you read everything in the loan proposal. Read all of the fine print, and make sure you understand any type of penalties that are built into the contract, and of course, any terms that may be detrimental.
Remember, these loans are written by attorneys who specialize in this field, and they know that you need the money. You will need to be cautious that you are not putting yourself into a detrimental position by taking out the funds.
If you find terms that seem unacceptable or a bit much to stomach, you need to make sure you find an alternate financing option, or even, simply learn to save.