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If you are wondering how to get a personal loan to consolidate debt or for any other reason, here is what you need to know. (iStock)

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You may consider a personal loan for a variety of reasons, such as paying off high interest debt, covering a sudden emergency, or making a major purchase. Depending on your credit history and other personal factors, you may be able to get a personal loan with a competitive interest rate. And you can apply for prequalification without affecting your credit score.

If you’ve decided that a personal loan is the right financial product for you, here’s a look at how to get it, what you can do with the money, and what to expect from the application process.

reliable makes it easy Compare Personal Loan Rates from multiple lenders.

Where can I get a personal loan and what can I use it for?

You can get personal loans from financial institutions such as banks and credit unions, and many online lenders specialize in personal loan products as well.

You can do this take a personal loan For a number of purposes, including:

  • Pay off or consolidate existing balances, such as credit card debt or any auto loan.
  • Fund home improvement projects or renovations.
  • Cover big expenses like wedding or travel.
  • Pay bills for unexpected costs like car or home repairs.
  • Cover emergency expenses.
  • Pay for medical or dental procedures.

Aside from using the money to gamble or engage in illegal activity — or, in some cases, to pay tuition expenses — there aren’t many limits to how you can use a personal loan.

How to get personal loan

So, you have decided to take a personal loan. Here’s what you need to know about the process, what you can do to get approved for that loan, and how you’ll get the money.

Decide How Much You Want to Borrow

before you apply for personal loan, determine how much you need to borrow. If you plan to use a personal loan for debt consolidation, add up your existing credit card balance and other debt. If you want to use the loan to pay off an auto or other installment loan, you may need to get a payment quote from your other lenders.

check your credit report

When you apply for a loan, lenders will check your credit to determine whether or not to give you a loan, and to calculate what interest rate they need to offer. Knowing where your credit is before you apply can be very valuable and give you an idea of ​​the loan options available to you.

you can request Free copy of your credit report From each of the major credit bureaus — Equifax, Experian and TransUnion — annual credit reports. Look for common inaccuracies, which can include accounts that don’t belong to you or false abusive reports (such as late payments that actually happened on time). If you find any errors, report them to both the creditor and credit bureaus to have them removed.

shop around

Comparing multiple lenders can be a great way to not only see the options available to you, but also to make sure you get the best possible deal on a personal loan.

Credible to. Consider using an online lending platform like Compare offers from multiple lenders All at once, without affecting your credit.

get pre-qualified

Personal Loan Prequalification Can tell you what loans you’ll be eligible for and what to expect in terms of rates and monthly payments. This can help you narrow down your list and choose the most suitable lenders to suit your needs.

To pre-qualify for a personal loan softens your credit, which will not affect your score.

Compare Loan Details

Now that you have pre-qualified and shopped with multiple personal loan lenders, it is time to review your offers. This will help you decide which lender to apply officially with.

Compare these important factors when reviewing loan offers:

  • April – The annual percentage rate takes into account your interest rate and any fees, so it’s more accurate than simply looking at your interest rate.
  • Repayment Period – This is how long you will have to repay the loan, which affects the monthly payment amount.
  • Fee – Some loans include origination and other fees, which can add to your costs.

apply for loan

After deciding on a lender, applying for your personal loan is the next step. This part of the process makes your loan-shopping experience “official,” as the lender will run a hard credit inquiry. This hard stretch gets added to your credit report and can temporarily lower your score by a few points.

As part of the application process, you will need to provide the lender with certain information, including your address, phone number and date of birth, and personal identification such as your Social Security number or driver’s license number. The lender may also ask you to provide proof of employment, proof of income, and a recent tax return.

close the loan

You’ve made the purchase, you’ve applied, and you’re approved. Now, it’s time to close your loan. Closing is the last step in the personal loan process. Once your loan is closed, the contract becomes official and the funds are disbursed in a lump sum.

To close your new personal loan, you will need to sign a loan agreement, or promissory note. This agreement explains how much you are borrowing, the interest rate and repayment schedule you agree to, and other terms required by your lender.

Depending on the lender and when you close your loan, you may receive your loan amount on the same day or the next business day. These funds can be deposited electronically into a bank account of your choosing, or you can request a paper check.

What are the requirements for taking a personal loan?

When deciding whether to grant you a personal loan, lenders consider some important factors to determine whether you can afford the new loan and how likely you are to repay the loan as agreed.

Requirements vary from one lender to another, but they will generally refer to the following:

  • credit score/history How well you have managed debt in the past can be a good indicator of how you will manage debt in the future. Lenders will look at factors like yours credit score, your payment history, the mix of credit-based accounts you have, and how long you have been managing these accounts. Offensive reports – such as late payments or charge-offs – can seriously affect your acceptance.
  • Income Before giving you a personal loan, a lender wants to make sure that you can comfortably afford the monthly payment.
  • debt-to-income ratio — The more you are burdened with debt, the more risk you can pass on to a new lender. Lenders will calculate your debt-to-income ratio (DTI), which tells them how much of your income already goes toward your existing balance. If your minimum monthly payment consumes too much of your income, you may not be approved for your new loan.
  • collateral — Personal loans are generally unsecured, which means you do not need to deposit collateral. But a secured loan that holds certain assets as collateral (such as a savings account, vehicle, or certificate of deposit) can make getting a loan easier or more affordable.
  • cosigner — If you don’t qualify for a personal loan yourself, or if you want to get better loan terms, you may be able to add a cosigner with good credit, such as a parent or spouse. This person is equally responsible for timely repayment of your new loan. If you fail to make payments, your co-signer will be obligated to pay the loan.

Advantages and disadvantages of personal loan

Like any financial product, personal loans come with advantages and disadvantages to consider.

Benefits of personal loan

  • Funds are fast and flexible. You can do this Use Personal Loans for Almost Any Purpose, and depending on the lender, loans can be disbursed in just a few days or hours.
  • Rates are low compared to other types of credit. Compared to credit cards, personal loans usually come with much lower interest rates.
  • No collateral is required. Personal loans are usually unsecured loans, so you will not need to deposit collateral to get the loan.

cons of personal loan

  • You may have to pay a fee. Some lenders may charge an origination fee when your loan is issued, or you may be subject to prepayment penalties if you pay off your loan early. This can increase your overall cost of borrowing.
  • There is no flexibility with monthly payments. Personal loan is an installment-based product. This means that you will receive a lump sum amount and pay off the loan with equal monthly payments for a stipulated period.
  • This can hurt your credit. If you default on your personal loan or fail to make payments on time, you may end up with a derogatory report on your credit, which may remain on your credit report for years to come.

Can I get a personal loan with bad credit?

Like most financial products, getting approved for a personal loan is easy if you have good or excellent credit. still possible to get personal loan with bad credit – It may just take a little more effort.

Some lenders work exclusively with people with bad credit. Just keep in mind that the lower your credit score, the higher the interest rates you will be charged. If your credit score is too low, you may need to add a cosigner with good credit to your loan in order to be approved. You can also consider applying for a secured personal loan which…