Best Ways to Apply for a Personal Loan

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.

  • FAQ for borrowers searching for personal loans in Texas

    How do I decide if a personal loan is right for me?

    A personal loan is a significant commitment. Weigh the benefits to decide whether paying interest for the privilege of borrowing money in advance is crucial. Understanding your responsibilities in addition to the reasons for taking out the loan is critical to obligating your future income to make the payments.

    How does a personal loan affect my credit score?

    Hard inquiries performed by creditors are going to knock a few points off your credit score. You can increase your credit score by making timely payments and never missing a single one. Paying late can affect your credit score and block access to future loans. 

    Do personal loans need collateral?

    Personal loans are generally approved based on creditworthiness. Typically designated as “good faith” loans, the lender won’t need collateral to guarantee that you’ll repay what you’ve borrowed. Although riskier for loan issuers, unsecured loans can cripple your ability to access further credit if you fail to repay to completion. 

    Can I change my payment due date?

    Your payment due date will be set when your short-term loan is approved and will be the same date during the month. You won’t be able to change this pre-determined date. 

    What are the different types of short-term financing?

    Short-term loans, trade credit, overdrafts and credit cards are common examples of short-term financing. Typically, the repayment period is as short as a few weeks up to five years in length. Depending on the type of financing (personal loan, unsecured loan, installment loan) and lenders terms, you will generally find many loans are between six to thirty-six months for repayment.