People that need cash to cover for an urgent financial expense take a personal loan. A personal loan is an amount of money that you borrow from a bank, a credit union or other lenders that you have to repay in fixed monthly payments or instalments for two to seven years, including interest. In the UK, taking a personal loan is easy and quick because other lenders require few documents. However, if you are planning to borrow a significant amount at the lowest possible interest rate and the best payment terms, following these steps would help you avail of the best deals when applying for a personal loan.
Step 1. Determine How Much to Borrow
When you take a loan, make sure that the amount is enough to cover the amount that you need. Applying for a small amount cannot resolve your problem. However, do not borrow more than what you need and can afford to repay to avoid future financial problems. Calculate the amount that you must pay every month to have an idea of whether you can afford the loan or not.
Step 2. Find the Right Type of Personal Loan
Personal loans may be a medical loan, secured personal loan, debt consolidation loan, and unsecured personal loan. Undergoing dental or medical procedures can be costly. However, there are lending companies that offer medical loans.
A debt consolidation loan intends to roll into one all your debts so that you would have to pay a single lender instead of multiple ones. Lenders could lend you money enough to pay all your debts.
Borrowers that need a significant amount of money and have a property to use as collateral may apply for a secured personal loan. At the same time, if they do not own anything of value, they can opt for an unsecured personal loan.
Step 3. Decide from Whom to Borrow
Banks and credit unions offer low-interest rates. Nevertheless, they might require several documents and might take time to process your loan. Quick loans could be costly, but if you need cash immediately, you can find many lenders that would release the funds a few hours after approving your loan application.
Step 4. Know Your Credit Score
Banks and credit unions might be particular with the borrower’s credit score. If you have a high credit score, you could take a loan from a bank, where you could get a loan for a lower interest rate. For those with low credit rating, applying to borrow money from lending companies that do not consider credit rating as a prerequisite for a loan would be advisable.
Step 5. Check the Lender’s Requirements
Learn the requirements of the lender. Applying without the complete set of documents would be a waste of time. Banks and other traditional lenders might ask for your credit score, annual income, debt to income ratio, and credit history. Borrowers that cannot submit one of these documents have to look for credit companies that do not require these papers.
Step 6. Gather All Documents
Have all the documents on hand before sending your application. Lenders that do not require credit history would ask for a government-issued ID, bank statement, employment certificate, Social Security number, and the contact details of your employer.
Step 7. Submit for Preapproval
After you have gathered all the documents, you can submit your loan application for preapproval. The lender will give you the calculated loan amount, interest rate, and repayment schedule. Since the estimates are not yet final, you can make a comparison with other lenders that have preapproved your loan.
Make sure to follow these steps when seeking a loan for an easy and quick approval. Making comparisons of several lenders would let you find the best deal for you.