People apply for personal loans, the popular form of loans, every time they need a loan. There are many reasons for personal loans to be a favorite with people. For starters, they do not come with a condition that they must be used for a specific purpose. This means that the consumer is free to use their loan in whichever way they want. These loans are mostly used to meet temporary monetary needs such as overdue bills, wedding, vacation, down payments, home renovation etc.
Another reason that makes personal loans so common is the fact that they are unsecured. You are not required to provide any collateral to avail the loan. As a result, the paperwork involved in getting loan is much simpler and hassle-free.
It is very easy to apply for a loan if you are looking to get a loan in Wichita Kansas. However, here are a few things that you should keep in mind when submitting your application.
Assess your needs
Before you commit yourself to the financial obligation of a loan, be sure to thoroughly evaluate your needs. As is with any other loan, the personal loan must also be paid monthly over a period of time through EMIs. Don’t forget that you must factor in the additional expense into your budget to see if it is affordable. You must also ensure that the loan you are applying meets a specific requirement. For instance, don’t apply simply apply because you have been pre-qualified by your bank for the personal loan. This will only add on to your debt without fulfilling any purpose. So, ensure that the money you are borrowing will be used productively.
Conduct your Research
Before you borrow from a bank, be sure to conduct your due diligence and thoroughly research all the available options. Don’t just go with the first lender that you come across. If your credit score is good, then the banks will be happy to advance you the loan at very reasonable interest rates.
Your credit scores are the single most important factor for the lenders to decide if they should give you the loan or not. Since these are unsecured loans, the risk is much higher and the lenders are far more skeptical in their lending practices. As a result, the banks prefer to work with borrowers who can give them a certain amount of confidence that they will not default on their loans. This confidence comes from your credit scores. The people with stellar credit scores are the ones who have never defaulted on their payments, maintained their debt ratio, and paid all their loans flawlessly. If your credit score is anything above 750, then you are an ideal personal loan candidate in the eyes of the lender. You can check your credit score by requesting a free copy from one of the three credit bureaus every year.
High-Interest Rates for Low Credit Scores
People with poor credit rating may find it hard to get the loans. However, that doesn’t mean the lenders do not make exceptions. Sometimes private lenders are willing to risk their investment on people with low credit scores by offering them a loan at a higher rate of interest, stricter terms, and sometimes amount lower than what they want.
Do an Eligibility Check
Before you apply for personal loans, you can ask your lender to check your eligibility based on your income, employment, and previous credit history. Income is an important factor for the lenders to sanction loans. It is also an indicator of the borrower’s repayment capacity.
Compare Interest Rates, but Don’t Shop Too Much
While it is advisable to compare the interest rates offered by various lenders, it is recommended to not shop from multiple lenders at the same time. Too many loan queries within a short period of time can affect your credit score. It also gives the impression to lenders that you are desperate for money and may not have the means to pay back. Believe it or not, people have been denied the loan for shopping with too many lenders at the same time.
Apply Only After Six Months
If your loan has been rejected, don’t apply immediately again. Experts suggest that you should wait for at least six months before reapplying. If your loan was rejected due to poor credit rating, then use this time to restore your credit score. If your loan has been rejected once, then it is often a waste of time to go to other lenders who may also reject your application.