There has always a lot of negative stigma regarding personal loans. If you try to look it up, there are a lot of horror stories of messed up credit or unforgiving interest rates to go around. However, what a lot of people tend to ignore is that all horror stories have a solid root.
A lot of these “horror stories” stem from personal irresponsibility—not reading the fine print, being negligent on payment, not planning for the future—the list goes on and on. So with a bit of proper planning, such instances can totally be avoided
In order to provide our readers with a better understanding of how to handle personal loans well, here’s some tips for you to remember:
Do Due Diligence
When you’re trying to find a lender or even when you’re thinking of taking out a loan, it is important that you practice due diligence! Here are some ways you can do that:
Compare banks and lenders
Much like when you go shopping for groceries or luxury good, you always want to check if you’re getting the best deal possible. This means comparing:
Not ever lender has the same interest rate. While your credit score will give you arelative idea of the interest rate you may categorize into, there are still certain lenders that may be willing to offer you less interest for the amount that you need.
Every lending institution has their established interest rates. Most of them don’t actually announce this so it’ll be up to you to do all the research yourself. It would be in your best interest to make sure that you’re choosing the company that can offer you the best possible deal. What will come in handy is the fact that most personal loans come at a fixed interest rate—so the interest rate you agree to is the one you’re bound to until you fully pay off the loan.
Types of personal loans available
Much like interest rates, lending institutions don’t have the same kinds of personal loans available. Types like secured, unsecured, fixed-rate, payday loans, installment, and many other types.
Lenders and banks are still a business. So as much as possible, they will try to increase their profit. This means adding fees on top of the loan for processing or whatnot. As a consumer it is important that you stay on top of the usual fees that are attached to a personal loan. See if they’re legitimate. Also, not every lender may have them. So comparing lenders beforehand will give you a better and more informed choice.
Loan terms and repayment options
Since you’re interested in taking out a loan, lenders will be quite vested in the ways in which they can recuperate the amount they lend. As such, it would be important to check out the various loan terms and payment options that they have.
There are lenders that have a weekly, bi-monthly, or monthly payment for loans. Check the repercussions on missing due dates—how long is the grace period before you get flagged? This is important as you never know when an emergency situation can occur and you won’t be able to make your payment on the day when it is due.
Prepare All Your Documents
Once you’ve found a lending institution with rates and details that you’re comfortable with, it would be important to find out beforehand what sort of documentation you will need to provide. Showing up unprepared can give the wrong impression and your application can end up rejected.
All it takes is a phone call or a browsing the lender website. You can either expect to find all the details you need on the website or it will direct you to a client liaison that can help you out. Getting everything in order will increase your odds of being approved. Here are some details that you may need:
Letter of Intent
This should clarify your declaration of intent to secure a personal loan. Clarify the type, the amount you’re aiming to secure, and what it’s for. Not all banks or lenders may require this so it’s best to clarify with them if it’s needed.
Proof of Identity
These can include any government issues IDs, your social security number, or passport.
Proof of Residence
As much as possible, lenders would like hand out personal loans for those who have ties to an area. This lessens that occurrence of fly-by-night lenders. This can include copies of utility bills. They will want to see that you aren’t slipping in your payments anywhere else.
Copies of Pay Slips
Lenders will want to see that you do have a way of paying back the loan that you’re taking out. You can do this by providing copies of your pay slip tracing back to at least three months or so.
Most Recent Credit Report
Credit is everything. It helps to determine the sort of interest rates you’ll get. More importantly, they’ll determine if you even get approved or not. Request your credit report from a credit bureau you trust. If you see that your credit is good, you can go ahead with your loan application. If it looks like it needs to be rehabilitated, sort that out first before you take out a loan. Remember, whenever you approach a lending institution for a loan (processing and everything) that goes on your credit report. Having too many attempts to secure a loan can flag you as credit hungry.
Be Patient and Calm
One of the biggest mistakes that people make when attempting to secure a loan is being too emotional. There are a lot of different reasons why a loan application can pass or fail. It is important to remain calm at all times. A scene is not what you want your potential lender to remember you by.
If you ever get rejected, find out why and avoid it from happening again. With all these in mind, you have a look back on what you’ve done so far regarding your quest for a personal loan. If there’s anything you have done yet, best get to it. Best of luck!