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Apply for a personal loan
Whether you simply need to cover living expenses while unemployed or pay off debt, a personal loan is a viable option. When you need money fast, you may not ask too many questions when a lender approves your loan application, but you don't want to make a mistake that costs you.
Choosing the right lender
Before you start applying for a personal loan, you'll want to vet lenders because there are a few things to consider.
- Costs: Don't be surprised to see various fees added to your loan. Each additional fee charged by lenders for your personal loan increases the cost of the loan. Between application, origination and prepayment fees, personal loans can get expensive. However, not all lenders charge fees, so it is possible to keep the cost of the loan affordable.
- Hard/soft survey: Applying for a personal loan can result in a hard investigation, a soft investigation, or both. Most lenders will want to look at your credit report to determine how risky they would lend to you. When your credit report is pulled, you will see a hard inquiry on your report, which can negatively impact your score. On the other hand, some lenders will do a soft inquiry or not check your credit at all.
- Financing duration: How quickly you need cash can affect the lender you select. Some lenders can provide money to borrowers within hours, while others will take a few days to send the funds. If you need money ASAP, some lenders simply won't be an option.
- Borrowing limits: When you look at lenders, you will see different borrowing limits. The minimum and maximum amounts you can borrow should be considered when searching for a lender, especially if you don't want to borrow more or less than you need. Keep in mind that just because you apply for a loan, it doesn't mean the lender is required to approve your application for the amount you requested. Since several factors determine how much you can borrow, there is no guarantee that your loan will be approved or the amount you request.
- Term of the loan: Lenders will give borrowers weeks, months and years to repay their loans. You want to make sure you have enough time to repay your loan, so it's important to consider the loan terms offered by lenders. There will be a fixed amount you pay each month, which will be determined by the lender, but ultimately only the borrower can decide whether making these monthly payments and repaying the loan before the loan term expires could be a challenge.
- Interest rate: Every lender will charge interest on their loans. This is the cost of borrowing money, so in addition to the principal amount borrowed and the fees charged by the lender, you will pay interest. As with fees, interest can increase the cost of the loan. However, not only can interest rates vary from lender to lender, but interest rates vary from borrower to borrower. The interest rate is determined based on several factors, including credit score, income and loan term, so a borrower can easily be charged a higher or lower interest rate than another borrower.
Many people turn to personal loans when they need financial help. With so many different lenders, you have a lot of choices, which can be overwhelming. You want to make the right decision when you get a loan, and to do that, you need to make sure you know what to expect from lenders.
Struggling to get approved for a loan due to a low credit score? Contact Credit Absolute for a free credit consultation.