HOW TO APPLY FOR A PERSONAL LOAN
A personal loan, also called a consumer loan, narrates any situation whereby an individual borrows money for personal needs.
Elements Of Personal Loan
Personal loans generally have three elements:
- Evidence of the debt
- An amount borrowed
- The cost of borrowing or interest rate
When the loan repayment terms are met, the evidence of debt is retired. But if the repayment terms are not met as agreed, the lender can recover its money by using the legal system.
Where To Get a Personal Loan
There are two main categories to getting a personal loan:
1. Those with a banking licence
2. Those without a banking licence
Regulation is the main distinction between the two categories.
1. Banks and credit unions: When you apply for a loan here, your experience is personalised. You meet face-to-face with a loan officer, and the officer smoothly guides you through the application process.
Their loan qualification standards tend to be higher than others. The credit union qualification process is less rigid than in banks. Their Interest rates are also lower. But you must be a member to operate there.
2. Non-banking financial institutions: These are sources without a banking licence. It includes insurance companies, lenders, peer-to-peer (P2P) lenders, payday and other non-bank entities.
These companies typically charge higher interest rates than credit unions or banks, but their loan qualification standard is not rigid.
Eligibility
Make phone calls or visit lender websites to determine if your financial profile qualifies you to get a loan from that particular lender. Ensure to know what is acceptable to them.
Most lenders run a credit check to know if you are likely to repay your loan. If, after this, your credit score is low for some reason, you might still get the loan, but the interest rate may be too high.
How good your credit score determines your approval for a loan and how low your interest rate is.
Documents Required For Personal Loan Application
Loan providers differ and may inquire about different documents when you apply for a loan. You need at least three documents for the loan application:
- Proof of income
- Proof of address
- Proof of identity
Your loan provider might also ask for other information in addition to these. They might even ask for the purpose of the loan or a co-signer.
How To Apply For The Loan
You need to complete these steps below.
Step 1: know how much you need.
It's recommended that you decide how much you want before choosing a personal loan and get a loan that you can afford to pay back when the time is due.
Step 2: Choose your loan type
After knowing where your credit stands and having your options figured out, you should determine which loan type is suitable for you.
Some lenders might be flexible when it comes to how you use the funds, while others will only approve your application if the funds are used for particular purposes.
Step 3: Compare offers
The next thing on the list after deciding how much you need is to do some research to compare the fees and rates of different personal loan providers. A loan comparison tool is an easy way to achieve this.
Getting a better sense of loans you are eligible for can be done by using the tool above, including your interest rate and how much you could borrow.
Step 4: Gather your documents and submit the application
After reviewing your loan options, you will have to make a decision and submit a full application.
Step 5: Wait for your approval and funding.
If they approve your application, you can expect your loan to be transferred to the bank account you put down for direct deposit or cash, as the case may be.
There is no specific known time your application will take to be approved. Once you receive the money, make your payment as agreed.
