Applying for a personal loan is easier than ever. You don't need to take a step out of your home and you can get a loan and have money deposited into your account.
There are a number of reasons to take out a personal loan including debt consolidation, home improvements, vacations, or buying a large item. Some people even take out personal loans to help improve their credit.
However, before you decide to apply for a personal loan, consider how it fits into your overall debt management picture.
Should You Apply for a Personal Loan?
Before you decide to apply for a personal loan, check your overall financial position. Here are three things to consider before deciding if you should apply for a loan:
- Credit score is good to excellent: If you don't have good credit, then the chances are that you are going to get a high interest rate. If you have credit issues, then check on the best ways to improve your credit score. Start by checking your credit report and if necessary, dispute any incorrect negative items.
- Monthly payments are affordable: Even if you qualify for a personal loan, that doesn't mean it is affordable. Since the term of the loan is short (usually between 2-5 years), the monthly payments can be high. Take into account your total financial picture and make sure that you can afford the monthly payments.
- The loan meets your financial goals: Since personal loans are taken for a number of reasons, check to see that this is the best solution for your situation. For example, if you are looking to make home improvements, then perhaps a home equity loan or a cash-out mortgage refinance loan better is more affordable and frees up money for other needs. If you are looking to consolidate debt, see if the loan offers a lower interest rate. If you are struggling with debt, then other solutions may be either cheaper or more practical.
In debt and considering a personal loan? If you are not sure that applying for a personal loan will best fit your financial situation, then before you actually apply for a loan, check out Bills.com Debt Navigator, for a free personalized debt relief option.
What is the Best Way to Apply for a Personal Loan?
Shop Around: Almost any lender lets you make an online application. You will need to provide them with basic financial information and allow for a credit pull. When shopping for an online loan, the lender will probably only do a soft pull. Check out the terms including the rate, fees and length of the loan.
Choose a Lender: Banks and credit unions offer personal loans. However, personal loans have become a popular product with many non-bank lenders, including peer to peer and non-bank lenders such as SoFI, Lending Club, and Prosper.
Get Your Financial Details Ready: Most lenders require the application form to include personal information, income and employment information, and data about your housing expenses. Depending on your situation, the lender will require you to submit other documents, such as wage slips, W2 form, and utility bills. For a more detailed list check out Wells Fargo Personal Loan Checklist.
Once approved, lenders can almost immediately wire money to your account. However, take the time to make sure that the loan best fits your financial situation.