Best Ways to Apply for a Personal Loan
The best way to apply for a personal loan is to apply it online. If you apply online, you can get an answer for the loan approval within a short period of time. On the other hand, if you apply for a loan at your local bank, you will have to stay in the bank for several hours due to a long queue. Approval for the loan will take at least 3 months when you apply it in the traditional way at the local bank.
Your credit score will dip every time you apply for a loan so it is not wise to apply for more than one loan at one time. That is because the lender will make a hard credit check every time if you submit the loan application. The hard credit check will appear on your credit report for up to 2 years. It will also deduct a few points from your credit score. The credit score shows how well you are in managing your finance. Having a good credit score is the best way to increase your chance of getting approved for the loan.
Instead, it will be wiser to get preapproved first before applying. Not all online loans offer preapproval. To get preapproved, you must meet the minimum credit score and other minimum borrowing requirements. If you are preapproved, they will send you an email invitation that contains a guide on how to proceed in applying for the loan. This involves submitting a few important financial documents. You will have to prepare the latest bank statements and payslips for at least the past 6 months, and income tax returns.
Review Options and Create a Checklist Before Applying for a New Personal Loan
You should not be disappointed if you did not get approved for the personal loan you applied for. Denial of a loan can be caused by low income, low credit score, or lack of credit history in your credit report. Instead, you should work hard in improving your financial condition, for example, making on-time payments for your existing credit card to raise your credit score. In the loan denial letter, it will state the reason why you are denied and how you can obtain a credit report. It is free to request a credit report if you want to check your credit score.
You are not obliged to apply for the loan once you get preapproved. You can reject the loan offer if you change your mind. Preapproval for the personal loan online can occur in a matter of a few minutes. During preapproval, the lender will use software to check for the information you apply including credit score, income, and personal information. However, they haven’t taken the time to evaluate your application in detail.