Would you like to consolidate your credit cards, pay your taxes, or finance an unexpected expense? You might be able to qualify for a personal loan from a bank or other financial institution.
The Basics of Personal Loans
These are the basic things to know about personal loans:
- They are usually offered in amounts from $500 to over $50,0000, depending upon need, income, and credit history.
- As with all other loans, good credit helps, but some lenders are willing to offer loans to people who have had some challenges or haven’t had a chance to build much of a credit history.
- These are unsecured loans, so they don’t require putting up any property to secure them.
As with almost any other type of loan, good credit helps people qualify for a larger loan and lower interest rates. According to NerdWallet, a credit union or P2P lending site may offer the lowest interest rates to people who don’t have great credit. Alternatives to personal loans may include secured loans, like home equity loans, or even introductory offers on credit cards with a low or even 0% interest rate.
However, people who can qualify for a personal loan might find that they are relatively hassle free and better for their own situation. For example, some borrowers might not have home equity to borrow against. Others may not care to apply for another credit card because they are trying to get credit cards paid off or consolidated.
What’s Needed to Apply for a Personal Loan?
To apply for a personal loan, you’ll typically need to supply your lender with these things:
- Identification: You’ll need to provide the lender with an official ID and proof of residence. You’ll also probably need to give them information that they need to run a credit check.
- Income verification: You might need to prove your income with paycheck stubs or past tax returns.
- Financial verification: For larger loans, you might have to prepare a statement that includes your current expenses, debt, and so on.
Cautions for Shopping for Personal Loans
It’s important for prospective borrowers to pay attention to the terms of their loans. For example, some lenders may charge modest interest rates that are comparable to regular credit cards, but some may charge interest rates that are so high that they really don’t make these loans a sensible option. Of course, people with poor credit are most likely to get offered the highest interest rates.
Besides the interest rate, these are some things to watch out for:
- Pre-payment penalties: If you want to pay your personal loan off early, some creditors may slap you with a pre-payment penalty.
- Late-payment penalties: Some lenders may slap you with a large fee if you miss a payment, and they might even increase your interest rate.
- Overdrafts: Some lenders will want to automatically debit your payments, so it’s important to be sure you have enough money in your account to cover it to avoid an accidental overdraft on your checking account.
- Scam artists: The terms of some of these loans are so terrible that they may make getting out of debt almost impossible, so check out your lender with the FTC and BBB to learn about other borrower’s experiences.
Get Help Comparing Quality Personal Loan Providers
If you need a personal loan, FinancialHelpers.com is here to help. Compare interest rates and terms from multiple lenders to get the best possible deal before you decide to sign any contracts.