Did you know 39 per cent of Americans could cover an emergency that costs 1000 dollars? If you need to get a personal loan for some reason, we can help.
In this guide, we’ll go over how to apply for a personal loan. You can learn about the different documents you will need to provide. We’ll answer the question, “What Do I Need to Get a Personal Loan?”
Want to learn more? Keep reading.
What’s Your Credit Score?
If applying for a loan, you will need a decent credit score. The credit score is critical to lenders when considering an application.
A credit score will range from 300-850. The scores are based on the length of credit, payment history, and amount of outstanding debt.
Lenders want applicants to have at least 600. Some lenders will lend to an applicant who doesn’t have a credit history.
If you have a low credit score at the moment, consider working on improving it before you apply for a loan. People with better credit scores will have a lower interest rate.
What About Income?
Lenders will also have income requirements for borrowers. They do this so the borrower will have the ability to pay back the loan. Minimum income requirements will vary.
Provide evidence of income. Get bank statements, tax returns, pay stubs, or signed letters from employers.
A self-employed applicant will need to provide a bank deposit or tax return.
What About Debt-to-Income Ratio?
DTI is a percentage that will represent part of a borrower’s gross monthly income. The income will go toward the person’s debt.
Lenders will use DTI to predict the borrower’s ability to make payments on current and new debt.
Lenders might ask borrowers to pay personal loan origination fees. This will cover the cost of running credit checks, processing applications, and closing.
The fees can range between one to eight per cent of the loan, depending on the applicant’s loan amount and credit score.
Some lenders’ origination fees will be collected at closing, and others will finance them into the loan amount.
You’ll Need to Provide Proof of Identity
Lenders will have to verify your identity to determine if you’re a permanent resident or US citizen.
Provide two kinds of identification. Use a passport, military ID, birth certificate, driver’s license, or certificate of citizenship.
Income and Employer Verification
An unsecured personal loan is different from other loan types. Auto or mortgage loans have collateral backing the loan.
With an unsecured personal loan, there isn’t collateral backing the loan, increasing the lender’s risk. That’s why the lender will verify if you have a steady income or not.
Traditionally employed, provide bank statements, pay stubs, tax returns, or W-2s. If you’re self-employed, you can provide income tax returns, bank statements, or 1099s.
Provide Proof of Address
You will need to prove your living situation, which will help the lender figure out if you have a stable lifestyle. Provide proof of insurance on your home, a utility bill, or a lease agreement.
How to Choose a Loan
Before you choose a personal loan, you’ll need to find out which is the best offer. You might qualify for a zero-interest credit card.
If you’re able to repay the loan during the introductory period, try this option. If you can’t repay it in the time frame, keep looking.
You don’t want to get a loan that will end up affecting your financial situation. Make sure you pick a loan that will help you out in your current situation. Make a detailed plan on how you will pay back the lender.
Bring In a Co-Signer
If you can’t qualify for a personal loan, you should look at bringing in a co-signer. Get a co-signed personal loan. Lenders look at your credit history and the credit history of the co-signer.
Go Over the Fine Details
Before you sign a loan, you should spend time reading the terms of the loan. You will need to get answers to any questions you have.
Make sure you look out for prepayment penalties. A lot of online lenders won’t charge a fee to pay off the loan early. Yet, you want to look out for this term. Otherwise, you will get penalized for paying off the loan earlier.
Does the lender allow automatic withdrawals? Make sure you avoid overdraft fees. Ask about origination fees, upfront costs, and interest.
Payments get reported to the credit bureaus. You will be able to improve your credit score if the lender reports your on-time payments.
Some lenders will let you pick your payment due date, and lenders will even forgive a late fee or let you postpone payment.
Some lenders will send out borrowed funds to creditors, which is beneficial for borrowers who want to consolidate debt.
Make a list of potential lenders you will choose. Consider checking out Plenti Personal Loan. You could also ask your network for recommendations.
Now You Know the Answer to “What Do I Need to Get a Personal Loan”
We hope this guide on how to get a personal loan was helpful. You won’t need to ask the question, “What do I need to get a personal loan?” anymore.
Gather all your critical documents so you can begin the application process today.
Are you looking for more finance tips? Check out resources on the blog today.