“How can I get a personal loan?” It’s a valid question and it might surprise you to know that it’s not difficult to answer. When it comes to getting personal loans, we can break the process down into seven easy-to-follow steps.
How to get a personal loan in 7 steps
- Calculate your costs
- Check your credit score
- Shop around for the best rates
- Compare your options
- Pick a lender and apply
- Double-check fine print and requirements
- Get the final approval
Let’s take a closer look at each of these steps. Then, you’ll be well on your way to getting the funding you need.
1. Calculate your costs
Instead of asking “how can I get a personal loan” you should be asking yourself how much funding is necessary. How much do you spend on groceries each month? What about your monthly car payments? Are there any utility costs to factor into the equation?
Before we get any further into how to get a personal loan, you should put a budget together of all your costs. We recommend using our Home Budget Calculator to get an accurate picture of what you’re dealing with. Ultimately, this will help you determine just how much money you need to get from a personal loan.
2. Check your credit score
You’ll want to figure out how to get a personal loan with low interest rates. That way, you’ll have an easier time paying off the amount borrowed. Having a healthy credit history makes it a whole lot easier to apply for an unsecured personal loan with agreeable rates.
3. Shop around for the best rates
An important lesson when it comes to how to get a personal loan is to shop around. Don’t just pick one lender that sounds good — see what else is out there. Some lenders might offer lower interest rates for the same loan amount than others.
We can also help you compare a wide variety of potential lenders and their rates. Just provide some basic information (ZIP Code, credit score, annual income, loan purpose and loan amount).
4. Compare your options
When we talk about how to get a personal loan and comparing your options, we mean more than just the various lenders. In fact, it might be prudent to look at all possible options before applying for a personal loan.
For example, if the major expense is something that might fit on a balance transfer card, it might be better to go that route. You could transfer your outstanding balances to one balance transfer card with over a year of 0% interest and pay it off within that window.
If your credit isn’t quite as stellar as you hoped, you might still have the option of applying for a secured personal loan. The main difference here is that a secured loan will need to be backed by collateral.
5. Pick a lender and apply
After you’ve done your homework, it’s time to pick a lender and apply. The application process (and the time taken) will vary based on the lender. In many cases, the lender will help handle this process online. Furthermore, on the subject of how to qualify for a loan, the lender will be able to help you determine your eligibility during the application process.
6. Double-check fine print and requirements
Carefully review the particulars of your personal loan. Ask yourself the following questions:
- Are there any loan origination fees I need to factor into my costs?
- Are these interest rates what I had in mind? Can they be lower?
- Is there a prepayment penalty if I decide to pay my loan off earlier than the maturation date?
When addressing the process of how to get a personal loan, you should be ready to spend ample time reviewing the policy.
7. Get the final approval
Now that you’ve chosen a lender and reviewed the terms to your satisfaction, it’s time to get final approval. Your lender will provide you with a small list of requirements including necessary documentation (proof of income, address, ID, etc.).
Your lender will review the information you’ve provided. They may also run a hard credit check, which will temporarily affect your credit score. Once everything checks out, you’re good to go and your personal loan will be forthcoming.
What’s a personal loan?
You shouldn’t even be asking “how can I get a personal loan” without knowing what one is. Let’s break it down!
A typical personal loan is an unsecured fixed-rate installment loan, generally ranging from $500 to $100,000, and collateral usually isn’t required to cover them.
The loan always has a set monthly payment and an end date when it will be paid off. Interest rates vary, depending on the lender and your creditworthiness. The most common uses of a personal loan are to consolidate credit card debt or pay for a big, one-time expense like a wedding, medical bills or funeral.
“Personal loans have become a more mainstream offering with dollar amounts that can go over $100,000 and at really competitive interest rates, well below what you would pay on a credit card,” says John Ulzheimer, a credit expert formerly with FICO and Equifax. “They seem to have evolved from just being low-dollar loans with high interest rates for people with bad credit to high-dollar options for people with good credit and high income.”
Why should I get a personal loan?
That’s a question only you can answer. Why do you think you need a personal loan? Is there a larger investment in your life that requires taking out a loan?
In some situations, a personal loan can be your saving grace. Take a medical emergency, for example. You might not have the necessary funding to cover the procedure and a personal loan can help cover the cost.
Ultimately, why you should get a personal loan depends on your current living situation.
How can I get a personal loan?
As you think about how to get a personal loan to fit your financial needs, here’s a breakdown of what you’ll need to do:
- Calculate how much you need.
- Check your credit score and credit report to see whether your credit is good enough for a low rate.
- Shop for rates and requirements at typical banks, but don’t forget online lenders, who often have different requirements from banks.
- Ask the lender whether inquiring about the interest rate on a loan will impact your credit score.
- If you are a young borrower without a track record of borrowing, online lenders are often a better option because they may look at criteria like education and career.
- Once you choose a lender with favorable rates and requirements, contact that lender.
How long does it take to get a loan?
“Waiting” is the lost 8th step in how to get a personal loan. Once you’ve determined the size of the loan and chosen your lender, you need to wait for the approval process. Some lenders handle the entire process online and cite a week’s time (7 days) at most. You should be prepared for that window of time or longer.
How do I avoid scams?
Unfortunately, there are fraudulent lenders and scammers. In order to avoid falling prey to these scams, be on the lookout for telltale signs. One of the biggest signs of a fraudulent lender is anyone unconcerned with your credit history. That’s a big warning sign, according to the Federal Trade Commission. Consulting the Better Business Bureau regarding a particular lender can also help you avoid any fraudulent lenders.
Consumers have a host of places to turn to for their personal loans. Banks and credit unions are common options and don’t necessarily require a trip to a local branch. Many streamline the application processes online. Other types of lenders, such as credit card issuer Discover, also have personal loan programs.
The application process is similar to any other type of loan. That includes a credit check to determine your risk of defaulting. Generally, a higher credit score translates to a lower interest rate.
Lenders will also require proof of income.
Understanding the basics and knowing how to get a personal loan can help you navigate one of the many financial options available when dealing with unexpected or large expenses.
PERSONAL LOANS RESOURCE: Learn more about personal loans and how to apply.