How & Where to Get a Personal Loan | A Step By Step Guide on How You Can Get a Personal Loan

 

 Whether you're looking to consolidate debt, make a large purchase, or just make some improvements around the house, a person alone may be a good option for you in getting the cash that you need. Hey, I'm Brianna with Bank Rate, where we've been a trusted source in finance since 1 976. And in today's video, I'm going to be walking you through eight steps that you should consider taking when taking out a personal loan. But before we get into that, I just want to talk to you a little bit about why a personal loan is a good option.

 

So typically, when you need money for something like an emergency or just something that was unplanned, you'll have three options in getting that funding.

 

They are payday loans, credit cards, and personal loans like we'll talk about in a few. The thing with payday loans is they are extremely predatory, and we want to avoid them by any means necessary. Interest on payday loans can be upwards of 400%. And typically, when you borrow through a payday loan, that money is due back within one to 2 weeks, and if you don't have it, they can come directly into your Bank account and take it from you. So again, we want to avoid payday loans.

 

But when we look at credit cards versus personal loans, the average interest rate on credit cards is about 16%, whereas the average interest rate on a two-year personal loan is a little over 9%. Personal loans are the cheapest option and really the best option for the things that we're going to talk about today. So with all of that being said, Let's go ahead and hop into the steps that you should consider taking if you want to take out a personal loan. Okay. So the first step is to run the numbers.

 

You want to know how much money you need to borrow, and you want to make sure that you consider a few things when you're coming up with that number. The most important is that a lot of lenders are going to charge you an origination fee, which is taken out of the amount that you borrow. So you want to look into what that origination fee might be and consider it when you ask for the amount that you want to borrow. Also, in running the numbers, you want to look at what your monthly payment will be once you borrow.

 

And I highly recommend using a loan calculator.

 

And if you head over to Bankrate Com, we have a dashboard where you can personalize your finance experience with dozens of different loan calculators. You can personalize it to show you the rates that you're interested in seeing and really just all of your finance needs. When running the numbers, I highly recommend that you check out the Bank rate dashboard. Okay, so the second step that you want to take is to check your credit. So most lenders are going to require a credit check and you have to have at least fair credit to qualify for a personal loan.

 

Now, that means that on the low end, your score is at least a 580. But keep in mind that good to excellent credit is not only going to be more likely to get approved, but your interest rate will be a lot lower. So if you check your credit and you find that your score is a little bit lower than you expected, I highly recommend that you go to annual credit report com where you can pull a full credit report from all three of the credit reporting bureaus, TransUnion, Equifax and experience.

 

From that you can dispute anything that shows up that you don't agree with, and that could be a major step in and you get your credit to where you need it. Now, if you go through all of that and your credit still isn't in that fair range, I highly recommend that you hold off when applying for a personal loan and really work to improve your credit so that you can get the interest rate that you desire and also just make sure that you're getting approved.

 

Okay, so the third step is to consider your options. Now, depending on how your credit was in step two, this could determine whether or not you'll need a co-signer for your loan. And if it is the case that you do need a cosigner, you want to start thinking about people that you can ask. And if you're unable to find a cosigner, there is another option in taking out a secured loan, which means that you have to put something like your house or your car up as collateral on the loan.

 

It is important to remember that if you fail to pay your loan back, the Bank can come and seize these items.

 

So that's just something to remember about a secured loan. And one more thing you want to be considering during this time is who you may want to borrow from, whether it be a traditional bank, a credit union, or an online lender. So these are all things that you kind of want to start thinking about and preparing for. Okay, so the fourth step is to choose your loan types. So depending on who you're borrowing from, some lenders may require that you provide the reason why you're borrowing the money and they can accept or deny you based on that by itself.

 

So I definitely recommend that you check out the Bank rate personal loan marketplace, because, on it, we have a lot of the different reasons that people take out personal loans and other information like interest rate and things of that nature on the different types of loans. Now, speaking of those different types of loans, Let's just run through a few. So one of the most popular reasons that people take out personal loans is for debt consolidation. And essentially, what that means is that you use the money from the loan to pay off all of your other debts, like credit cards or whatever it may be.

 

And now you have all of your debts in one big loan.

 

And now you're only making one monthly payment, as opposed to all the separate monthly payments that you were making before. And also, typically, the interest on the personal loan is going to be lower than the interest that you were paying before. Again, the most popular reason that people take out personal loans. A few of the other reasons, home improvements. Like I mentioned before, you want to build a new deck out back or fix up a bathroom.

 

A personal loan is a great option for doing these projects around the house. Medical expenses are another big reason that people take personal loans. I think that it kind of lessens the burden of whatever you have going on medically at the time and allows you to focus on the medical and then focus on paying off the loan later. And the last reason  I'll give is weddings. A lot of people use personal loans to pay for weddings and then worry about paying them off over time.

 

So again, you want to consider this. You want to be very transparent with your lender and just start thinking about this prior to going to them. Okay, so the fifth step, now that we've gotten things like the credit and considering our options out of the way, we want to begin shopping around for different lenders. Now, this is really important. You do not want to go with the first lender and the first interest rate that you're offered.

 

It's really important to shop around, get a feel for what your options are. And I previously mentioned, there are three different types of lenders that you want to consider looking at and comparing against one another, traditional banks, credit unions, and online banks. Now, I highly recommend that you start with the Bank or the institution, whether it's a credit Union Bank that you have a history with, that you're banking with, maybe you have a checking account with them. And this is very helpful because typically if you're a valued customer or you have a good history with this Bank, they may work with you a little bit better, more likely to approve you, and give you a lower interest rate.

 

And one more thing that I want to throw out there about the different types of lenders that you can go through that if you do look into online line lenders, typically, they'll run a soft credit check, which means that it won't impact your credit score.

 

But you can still get the information that you want and need to consider whether it's a good loan for you. So don't shy away from those online lenders because there is that benefit to them. Okay, so the sixth step that you want to take is finally to pick your lender and apply. So we've done all the research we've done, our due diligence. And we're finally at the application stage.

 

Now, the great thing about this is that a lot of lenders have everything completely online, which makes it so much easier. But there is some information that you want to have on hand, just things like your name, your address, obviously, how much you want to borrow like we talked about previously and what you're borrowing it for. And you also want to have your income and employment information on hand, because it's very likely that the application will ask for that as well. Okay So step seven is to provide any requested documentation.

 

So we filled out the application. We've provided the very basic information that they've asked for. But again, depending on your lender, some banks will ask for documentation to prove the things that we put on our application. So they may ask for pay stubs or proof of address, proof of employment. And the faster that you're able to provide this documentation, usually through uploading it onto an online portal, the faster you'll get an approval decision and the faster that you'll get your money.

 

So you want to have these things on hand and prepared. So the eighth and final step we finally made it to. The last step is to approve the loan and be prepared to start making payments. So after you've submitted all the necessary documentation and your application, the lender will get back to you and let you know whether or not you've been approved. And if you are approved, it is important that you accept the loan, which means that you're accepting the terms and conditions that go along with it.

And then you're also very familiar with when payments are due, which I'll get to in a moment. When you accept the loan, you typically can expect to see the funds in your account within a week. But a lot of online lenders, again, another perk to them is that they typically get the money to you a little bit faster. So maybe sometimes in one to 2 business days. And as I mentioned before, you want to make sure that you're very clear as to when your first payment is due because you want to be responsible for repaying these loans.

    flown a few things about repayment typically if you sign up for auto-pay the lender will lessen your interest rate sometimes up to a quarter of a percent so that's an option that you may want to consider if it's feasible to you is he use auto pay if possible pay back a little bit more than what the minimum payment is so that you can pay it back faster and that you end up paying less interest over the life of the loan so just a few repayments it's there but again we have plenty of repayment calculators over at bankrate.com you can put them on your dashboard and use them throughout the life of me paying your loan so there you have it the 8th but you should be taking if you're considering taking out a the personal loan I hope that you found them helpful I tried to be as thorough as possible in Walking you through them and giving you as much information as you need.