If you are in the process of applying for a personal loan, you may be wondering which is the right option for you. In today’s digital landscape, however, there is a great deal to choose from and it can be difficult to make an informed decision. This is especially true if this is your first time applying for a personal loan. If you need a helping hand, continue reading to find out everything you need to know.
Do your research
When it comes to applying for a personal loan, or any loan for that matter, you must do your research beforehand. This includes educating yourself on the various types of loans, lenders, and terms that are suited to your current financial situation. If you are struggling to know where to begin, there are a number of free online tools available designed to streamline the entire process from start to finish and find the right personal loan for you.
It may also be possible to filter the results by estimated repayment terms, APR, and even monthly payments. By doing so, you can assess your options at a glance and weigh up the pros and cons before making an informed decision.
Familiarise yourself with any restrictions
It is a common mistake to overlook a number of key restrictions or limitations during the process of shopping around for the right personal loan for you. To ensure you proceed with a well-rounded knowledge of the personal loan you intend to choose, you must familiarise yourself with any restrictions ahead of time.
It may even benefit you to directly contact the lender at the earliest convenience to prevent you from finding this information out down the line or when it is too late to make the necessary amendments. If you are on the hunt for a personal loan to enable you to purchase a car, for example, you should steer clear of lenders that specialise in offering personal loans designed to consolidate credit card debt with low-interest rates.
Consider your current bank or credit union
In recent years, there has been a sharp rise in the number of independent and/or online-only companies offering many different types of personal loans for various uses. But if the sheer thought of wading through these options fills you with anxiety, it may benefit you to consider your current bank or credit union.
By doing so, you may also be exposed to less competition when it comes to the rates and fees they offer you. This is especially true if you are yet to build a personal relationship with the bank you intend to proceed with. If you and your current bank have a strong relationship, on the other hand, it may be worth finding out what they are willing to offer you as a valued customer with a solid credit history.
Strengthen your credit score
If you are worried you may be rejected for a personal loan, it may benefit you to strengthen your credit score in any way you can in the months leading up to the submission of your personal loan application. This can not only increase the likelihood of it being accepted regardless of where you fall on the scale but also strengthen your overall financial position in the long run.
This can be done in a number of ways but is most commonly done by paying off any lingering or outstanding debt, increasing your credit limit, reusing delinquent credit cards, and paying future bills on time every time. It may also be worth scanning your credit report for errors on a regular basis and making the required changes as necessary going forward.
Send as many enquiries as you can
When it comes to choosing the right personal loan, you should send as many enquiries as you can but apply sparingly. This is because a vast majority of lenders can prequalify you for a personal loan before running a hard inquiry on your credit. By doing so, you can gain a better understanding of which rates and terms you are likely to be offered and investigate various avenues, without affecting your credit score, before making an informed decision.
If you are currently trying to decide how to choose the right personal loan, there are several factors you must consider beforehand. You must, for example, do your research, familiarise yourself with any restrictions, consider your current bank or credit union, strengthen your credit score, and send as many enquiries as you can.