How to Apply for Personal Loans
To apply for a personal loan, start by researching available lending options, including credit unions and banks, to find the one that's best for you. For example, consider a bank if you plan on paying off your loan early, or look at a credit union if you want lower rates. Then fill out the loan application online or at a local branch and include the necessary documents, such as a copy of your drivers' license, proof of income, and proof of your address. Finally, expect to wait up to a few days to receive a decision from the lender.
Decide how much you need. The first and most important step in applying for a personal loan is determining exactly how much you need to borrow. Remember that all loans are subject to interest, so you will have to repay more than the borrowed amount. You should try to borrow the least amount possible. Consider what you want to take the loan out for and whether or not you need to finance the entire amount. You may want to put your savings toward reducing the total amount of money you need to borrow. Find out your credit score. Before you begin applying for loans, you should find out what your credit score is to determine your eligibility for most types of personal loans. You can find out your credit report using websites like FreeCreditReport.com, CreditKarma.com or by requesting a credit report from a bank or credit issuing company you have requested credit from recently. There are three types of credit reports lenders may look at: Experian, TransUnion and Equifax. Each report reflects your payment history on past loans and lines of credit. Good credit is considered anything about 700. Fair credit is considered anything between 650 and 699. Poor credit is anything below 649. It will be difficult to get a loan with a credit score below 649 without providing collateral. Establish a budget. With an understanding of how much you need to borrow, you also need a solid appreciation for how much you can afford to pay in monthly payments. Many lenders will take your debt to income ratio into consideration when making a decision about your loan, so if you cannot afford to make the payments, you likely won't be approved for the loan. Make a list of all of your expenses versus your monthly income in order to establish a monthly budget. Make sure there is room in your budget for an additional monthly payment toward your personal loan. Your monthly payment amount will be different depending on the amount you borrow and the interest rate you receive. Compare different kinds of personal loans. There are a few different options available to you when choosing to apply for a personal loan. Each type of personal loan comes with its own set of advantages and disadvantages, so it's important that you choose one that's right for you. Home equity personal loans and lines of credit are based on using your home as collateral for a short term loan or consistent line of credit. Pay- Day loans can be extremely dangerous. These are extremely short term loans that are intended to be paid back within a week or so that often utilize predatory practices like extremely high interest rates and hidden fees. Credit cards are a form of personal loan that comes in the form of a line of credit. A bank will agree to provide you with the loan in exchange for monthly payments toward the loan, interest and fees. Some banks will provide you with a line of credit similar to that of a credit card but without the use of an actual card. Pay down credit cards. Before applying for a loan, it's a good idea to pay down any outstanding balances you have on your credit cards. Reducing the amount of overall debt you currently have can dramatically improve your credit score and your debt to income ratio. Maxing out your credit cards will make your “available credit” very low, which can negatively affect your score. Having large monthly payments can impact your ability to make payments on a new loan, which may cause lenders to deny your request. Choose between a credit union or bank. Credit unions and banks both offer options for personal loans, but each comes with its own set of advantages and disadvantages for you to consider. Before choosing to apply for a loan, you should determine what type of lending establishment you'd like to apply for your loan through. Credit unions are non-profit organizations that are member owned, whereas banks are often controlled by a board of trustees. Credit unions often offer lower interest rates than banks, but usually also offer fewer benefits to paying off your loan early. Most credit unions have eligibility requirements you must meet in order to become a member. These requirements may be that you work in a certain industry, live in a certain region, or belong to a specific association, religion or fraternal group. Decide if you want to provide collateral. If you don't have good credit, you may want to consider applying for a secured loan instead of a strictly personal loan. Most personal loans do not require collateral, but require higher credit scores and result in higher interest rates due to the risk being assumed by the bank. Collateral in secured loans can be anything you possess of value that a bank is willing to accept as collateral toward a loan. Some people choose to use their car, house, or business as collateral. You can also use your savings as collateral toward a secured loan. Consider having a co-signer. Another way you can move forward despite less than perfect credit is by having a co-signer. A co-signer can help you get approved for a loan if your debt to income ratio is too high or you don't mean the minimum income requirements as well. Loan co-signers share in the responsibility of repaying the loan and will have to take over payments if you fail to make them properly. Failure to repay the loan will negatively impact both you and your co-signer's credit. Compare loan options from different banks. If you already have a bank account with a bank you like, you may want to start by looking at their personal loan options, then look into some of the options provided by their competition. Each time you apply for a loan, an inquiry is triggered in your credit report, lowering it slightly, so don't apply for loans from multiple institutions. Instead, conduct preliminary research to help you decide which bank or banks you're sure you want to apply to. Contact lenders and ask them what their minimum credit score requirements are for personal loans. If you don't meet their minimum, you know to skip those lenders. Review loan options on lender websites. Some offer programs where additional payments will go toward the principal of the loan, reducing your remaining debt. Others add additional payments toward interest on future payments. If you are unsure about the options presented on a lender's website, contact them to ask for clarification. Gather the necessary information. There are a number of documents lenders may require you to provide when applying for a loan. It's important that you gather these documents ahead of time to ensure your loan request is processed quickly. Some common requirements are: Verification of your identity such as a passport, driver's license or state issued ID. Proof of your address such as utility bills or a copy of your lease. Proof of your income such as W-2s, pay stubs or bank statements. Fill out the application. Once you have chosen the bank or banks you want to request a loan from, you'll need to fill out their loan application. Most banks allow you to fill these documents out online, but you may want to visit the bank to fill them out in person in the presence of a loan specialist. This can reduce the amount of time you need to wait for a decision, as you can answer questions directly and even adjust your request based on information provided by the loan specialist. You may also be able to call the bank to apply for a loan over the phone by speaking to a loan specialist. Be prepared to offer information from the documents you gathered, including social security number, income, and your home address. Choose a loan option. When applying for your loan, you will need to indicate the kind of loan you hope to receive. If you intend to offer collateral, discuss that with the loan official and if they have different options that include incentives or repayment options, make sure you choose the right one for you. Researching loan options offered by the bank beforehand will help ensure you are prepared to choose the right loan option for you, Some loans may have prepayment penalties established to limit the number of people that repay their loans early to avoid paying the total amount of interest. Ensure you know all of the details of each option offered by your bank before committing to one. Ask questions. If you aren't sure about something the lender goes over while applying for your loan, stop them and ask. Committing to a loan is a serious responsibility and you want to make sure you understand everything about what you're getting into. Don't worry about seeming uninformed. Loan officers are there to help make sure you understand your loan. Do not agree to a loan until you have all of your questions answered. You may want to ask to meet with a loan official another day after you have all of the information. This will allow you to think about any questions you may still want answered before making a commitment to any loan. Get approved. Once you have all of your questions answered and your application submitted, it may take some time for you to receive a decision. Some lenders can make a decision immediately, while others may need a few days to consider your credit history, income levels and loan request. Once approved, ensure you make your monthly payments on time and in full. If you are not approved, you may want to work to improve your credit before applying again at that or any other bank. 
Decide how much you need. Find out your credit score. Establish a budget. Compare different kinds of personal loans. Pay down credit cards. Choose between a credit union or bank. Decide if you want to provide collateral. Consider having a co-signer. Compare loan options from different banks. Gather the necessary information. Fill out the application. Choose a loan option. Ask questions. Get approved. 