A personal loan is also known as an “unsecured loan” which means that the lender trusts that the borrower will pay it back at the appointed time, based on an agreement. Personal loans are typically used to finance personal expenditures or used for financial support to meet immediate needs. As a result, they usually attract fairly high interest rates. People can seek personal loans from banks and other financial services, and there is usually a set period called “the loan term” given for the borrower to pay off the loan. Here are some easy tips you can follow to help you secure a personal loan:
The first step is to do some research on the bank and loan product you wish to apply for. You can contact a few banks you have in mind via telephone, their website or visit a branch to get quotes. You must compare the interest rates of different banks and choose the one that offers the most suitable rate for you. Computing and comparing Annual Percentage Rates (APR) may be the most effective method of knowing the true cost of a loan because it takes into account the interest payable and additional charges when your payments are due.
It is indeed crucial for you to check your credit rating before applying because it will directly affect the interest rate you will be offered for securing the loan. If you have a poor credit rating, you are more likely to get high interest rates on the loan compared to the low rates you originally applied for. Having decided on the bank to approach, your next step is to apply for a loan.
Most banks usually make an instant decision on whether or not they are prepared to lend you money. This is called an “agreement in principle” but however, before the money can be released, you must meet some of their requirements for the loan. For example, some banks usually require loan applicants to have an existing account with them as one of the criteria before approving a loan. Some of the requested information may include some form of identification and proof of financial status by providing bank statements, credit history, employment records, etc.
You may have the option to apply online or to visit a branch, and this varies depending on the institution you are dealing with. It is usually faster to apply in person as long as you have all required information, however some banks may offer online services for their existing customers.
When applying for a personal loan, it is also important to stress the urgency of getting the loan approved and find out how quickly the bank can deliver. The bank’s response time usually depends on their verification and underwriting process. Remember, you are more likely to be approved for a loan if you apply to a bank that you already have a solid relationship with.