Life can throw an awful lot of expenses your way. From rent and mortgage payments to credit card bills to vehicle loans to everyday expenses like groceries and necessities, all of these costs add up. And, depending on your financial situation, you may struggle to pay for them. But that’s exactly where a personal loan could help you out.
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A personal loan can be a good idea for a number of reasons. It offers a way to get the cash you need – cash you can use to pay off debt, tackle expenses, or make a costly purchase. And you can take your time to pay back these loans, which gives you some flexibility.
If you’re considering a personal loan, here are four easy steps to take that’ll get the process going.
1. Consider Your Loan Options
Is a personal loan the right choice for you? You’ll need to do a bit of research before you can decide.
The first step for anyone who’s considering a personal loan is to consider and compare the available options. Before choosing a specific loan, you’ll want to think about these different factors that could affect the loans you qualify for, the amount of money you can get, and where you’ll get your loan.
Make sure to consider these options:
- Cosigner or No Cosigner. Do you want – or need – a cosigner to get approved for a personal loan? This can affect your interest rate, but it can also affect the type of loan you’ll qualify for.
- Putting Down Collateral. Will you put down collateral to get a personal loan? This means you’ll put up your vehicle, house, or cash to qualify for a loan, and the lender can take that collateral if you’re unable to repay it.
- Banks, Online Lenders, or Credit Unions. There are a number of different lenders who offer personal loans, and there are pros and cons to each. You’ll want to consider which options suit you before you begin looking at loans.
Think about these options before you take any further steps for a personal loan.
2. Choose Your Loan Type
Once you’ve narrowed down your options by considering things like collateral, cosigners, and different lenders, it’s time to pick a loan.
There are a number of different types of personal loans available, and each comes with different lending requirements and terms. You’ll want to research each option, each type of loan, to figure out which one is best for your financial situation.
Here are the common types of personal loans:
- Unsecured personal loans, which don’t require any collateral.
- Secured personal loans, which are backed by collateral (an asset like a vehicle).
- Fixed-rate loans, which offer a set interest rate and monthly payment amount for the loan’s lifetime.
- Variable rate loans, which feature interest rates that can fluctuate.
- Debt consolidation loans, which combine multiple debts into one loan.
- Co-sign loans, which require someone else to sign for the loan along with the primary borrower.
When you’re considering these loan types, make sure to also think about what you’d like to use the money for. Some lenders may restrict what the loaned money can be used for, but others will not. Knowing this information ahead of time will ensure you avoid any potential issues.
3. Shop Around for the Best Interest Rates
One of the most important factors in taking out any type of loan is the interest rate. A loan’s interest rate determines how much money you’ll pay over the lifetime of the loan. And it can lead you to pay thousands of dollars in additional cash.
So, you’ll want to look for the lowest interest rate possible. Lenders will determine your interest rate based on the state of the economy, current interest rates, and your credit score or financial history.
But that doesn’t mean you should accept the first offer a lender gives you. Don’t settle – instead, take the time to shop around and negotiate. Search for different loans from different lenders and compare interest rates. See what other lenders will offer you, or what types of interest rates you can qualify for.
And don’t be afraid to ask about lower interest rates. As Bankrate suggests, you may be able to get a lower interest rate if you’ve been a longtime customer of a bank or credit union. Online lenders may give you interest rate options by prequalifying you for certain loans.
If you take the time to shop around, you could save hundreds or thousands of dollars in interest alone. A lower interest rate is the best way to save money when you’re taking out a personal loan.
4. Pick a Lender and Apply
After you’ve compared interest rates and found one that works well for you, you’re ready to finalize your loan. The very last step you need to take is to choose a lender – and then you can officially apply for a personal loan.
To choose a lender, you’ll want to let the interest rate guide you. When you compared interest rates, you likely found that certain lenders offer lower rates than others. It’s a smart idea to choose one of the lenders with a low interest rate. Just make sure that you’ve vetted your lender completely to ensure you are getting a reputable loan.
Then, you’ll be ready to apply. Each lender offers different application options. Some will have you apply in person at a local bank or credit union branch. However, many lenders now let you apply entirely online.
Once you’ve completed your application, you’ll just have to wait to get the money from your loan. This can take anywhere from 24 hours to a few weeks, depending on your lender. It’s common to get your funds in just a few business days.
With your personal loan funds in your bank account, you’ll be able to use that money for any of your needs. Though the process of comparing options and finding the right lender may take a little time, a personal loan can be a quick and easy way to get the money you need.
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