One of the reasons that so many people apply for personal loans is because they tend to be easier to get than other types. There are still a lot of things that you should keep in mind before getting a personal loan though. The more of this information you have, the better your chances are going to be of getting approved and getting the most out of the money you borrow.
Your Credit Score
Probably the most important thing to keep in mind when it comes to personal loans is that they are given out based solely on the applicant’s credit score. This means having a good credit score will weigh heavily in your favor, and having a bad one can mean getting rejected. You don’t necessarily have to have perfect credit to get a personal loan, but a higher score is always better. Take a look at what your credit score is like before you even fill out an application so you can get an idea as to what your chances of being approved are.
What your Interest Rate will be like
One of the biggest concerns that people have when applying for any type of loan is how much interest they are going to end up paying. This will depend largely on what your credit is like. You may still be able to get approved for a personal loan with bad credit, but your interest rate is going to be higher. A high credit score will most likely mean that you will have a very reasonable interest rate that is highly manageable.
Loan Repayment Period
Repayment periods for personal loans range from a few months to a few years, depending on the total amount that you borrow. Pay loans typically have a very short repayment period of about 2 weeks, so you’ll need to pay back the money you borrow with your next paycheck.
Limits on how you use the Money
You will find that most personal loan lenders will not even ask you what you intend on spending the money you borrow for, so you won’t have to worry about that at all. There are some peer-to-peer lenders who might inquire as to the purpose of your loan application. If you aren’t certain about the restrictions of the loan you are applying for, you will want to make a point of asking in advance. Most of the time you will be able to spend the money you borrow on whatever you want.
Types of Lenders
Personal loans are given out by many different types of lenders, including banks, credit unions and private lending companies. Payday loans, for example, are typically given out by private lenders. Even pawn shops give out personal loans, though they usually come with fairly high interest rates no matter what your credit is like. It’s important to keep in mind that peer-to-peer lenders can be a lot more lenient than either banks or credit unions, so you might want to apply with one of these lenders first. While it’s true that payday lenders have lax standards, you will likely end up paying a lot in interest alone.
Getting a Co-Signer
The lender that you apply to for a long might ask you to get a co-signer for the loan if you don’t have the best credit. A co-signer is someone who promises to pay off the remaining balance of the loan if the primary borrower (you) is not able to pay it back in full for whatever reason. Peer-to-peer lenders usually do not require a co-signer, simply because they typically set minimum credit scores necessary for applicants to be approved.
If you cannot pay back your loan on time
In the event that you are not able to pay your loan back on time for any reason, it is crucial that you contact your lender right away. While you may not want to have this conversation, it is very important that you do so. You can try to make certain arrangements with your lender to pay the loan back late, though doing so might not be possible. This will depend entirely on the lender that you chose to borrow from.