Loans

Get Funded: All You Need to Know if You Want to Get a Loan

Everyone needs extra money at times. For many, personal loans are the answer to their monetary conundrums. At present, more than 21 million Americans are repaying personal loans, and that number has been growing steadily for several years. People take out loans for an array of reasons. They can cover the cost of home or vehicle repairs, finance major life events, pay for medical expenses, and cover the costs of emergencies to name a few possibilities.

Maximizing Your Borrowing Power

If you’re among the millions of people considering personal loans right now, numerous lenders are out there to serve. Of course, not all lenders and loans are the same. No two potential borrowers’ circumstances are identical, either.

As such, if you want to get a loan, it’s important to understand as much as possible about the process beforehand. Doing so can help to maximize your borrowing power while minimizing the risk of borrower’s remorse later on. Use the following points as guidance to help you get funded for your upcoming plans.

Know Your Credit Status

One of the first measures to take before applying for a loan is knowing your credit status. If you haven’t looked into your credit score, now is the time to do so. From there, dig deeper into your credit report. Lenders generally take applicants’ credit scores and borrowing histories into account when determining their eligibility for loans.

Having a low credit score or negative points on your credit report won’t necessarily destroy your chances of getting a personal loan. It could, however, have an impact on how much you’re able to borrow. It’ll most certainly affect your interest rate as well. Lower interest rates are reserved for borrowers with exemplary credit while those with negative marks are subjected to higher interest rates.

When it comes to interest, even a portion of a percentage could add up to significant extra expenses over the long term. If you have bad credit or no borrowing history at all, consider taking time to build up your status. That could greatly improve your borrowing power and make repaying a loan more affordable.

Shop Around

Armed with knowledge of your credit status, it’s time to look into the loans at your disposal. Research various lenders and the loans they offer to learn more. Some lenders offer loan calculators on their websites. Those allow you to enter the amount of money you hope to borrow, why you want a loan, your credit score, and other variables to determine how much borrowing power you actually have. In some cases, though, you may need to contact the lender online or by phone to get a quote.

Taking the time and effort to shop around a bit could pay off considerably in the long run. Different lenders have different eligibility requirements. Though you may not qualify for a loan through some, you’re bound to be eligible through others. Some lenders offer better interest rates and terms than others.

Furthermore, you may be able to borrow more money from certain lenders whereas others may not allow you to borrow enough to cover your plans. On the other hand, some lenders have minimum lending requirements. That might mean having to borrow more than you really need, which could lead to undue financial hardships down the road.

You don’t have to commit to anything during this phase of the process. It’s just a way of establishing a baseline for the steps to follow. Keep in mind, once you actually apply for a loan, the borrowing limits, interest rates, and other numbers you receive may be slightly different than those original estimates.

Crunch the Numbers

Once you have a good idea of how much repaying a loan might cost each month and from a long-term perspective, factoring those potential payments into your budget is recommended. Take into account your typical monthly expenses, including rent or mortgage payments, credit card payments, utilities, food, insurance, car payments, and other necessities. Weigh those against your income. Is there enough money left over to cover loan payments? After adding loan payments into the equation, is there any money left over for unexpected expenses?

If the answer to either of those questions is no, it may be best to consider other options. You could find ways to cut down on other expenses so covering loan payments wouldn’t place undue stress on the budget. Alternatively, you could put the loan on hold for a bit while improving your credit score to gain access to lower interest rates. Each person’s circumstances are different, so pinpointing the right solution here isn’t a straightforward process.

Have the Necessary Documents on Hand

Being privy to your credit score and report and having an overview of the available options will give you an idea of what to expect when you actually apply for a personal loan. After narrowing down the list to the lender and loan that seem to meet your needs, it’s time to submit your application. During the application process, potential lenders will ask an array of questions regarding your identity, employment status, income, living situation, bank account information, and other matters. They’ll want documentation to reinforce the information you give them as well.

Be sure to have on hand all the necessary documentation to prove who you are, where you live, how much money you make, and additional points that are in question. Those may include your driver’s license, social security card, bank statements, check stubs or W-2s, and a rental agreement or copy of a homeowner’s insurance policy to name a few possibilities. Not being prepared to provide those documents could delay the loan process or hamper your eligibility.

Getting the Right Loan for You

An ever-growing number of people are turning to personal loans. They’re an effective solution for a range of financial needs from covering large purchases to consolidating credit card debt. Numerous types of loans are available at this point. Rather than settling for the only option available, you can choose the one that best fits your needs and expectations.

The measures listed here can help secure the right loan to suit your requirements and circumstances. Start by gathering your credit score and report. They’ll pave the way for finding out how much borrowing power you have. Then, dig deeper into possible lenders and loans to get an idea of how much money you’ll be repaying.

Crunch the numbers to be sure you can afford a loan. From there, you can apply for a loan from the lender with the most suitable interest rates and terms. Having all the necessary paperwork on hand at this point will further facilitate the process.

A post by Kidal D. (6075 Posts)

Kidal D. is author at LeraBlog. The author's views are entirely their own and may not reflect the views and opinions of LeraBlog staff.

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