Whether you want to get a more modern car, pay any pending debts, had an emergency and need to pay medical bills or want to start a business, personal loans are one of the most popular financial instruments you can resort to to carry out any of these undertakings.
What are personal loans?Personal loans are essentially amounts of money you borrow from a bank, a credit union or any other financial institution. The borrowed amount has a fixed interest rate. Today, the amount borrowed can be secured or unsecured based on the terms of the financial institution.
Normally, these loans are also short term, which makes it easier to pay off quickly.
Due to the fact that these loans are short term, they may be easier to secure. However, each financial institution has its own specific requirements that must be met to be approved. For instance, when you request a personal loan for a credit union, they will conduct a credit check, and in order to approve your request, you will need to have a relatively high credit score and good credit standing.
You will also need to provide proof of income for the amount of money that you earn weekly, monthly or annually. If these requirements are met, your loan will be approved.
Personal Loan Application ProcessTo request and be approved for a personal loan, follow these steps:
- Complete a personal loan application form. Depending on the institution, you may be able to do fill out a paper form or complete it online.
- Submit the personal loan application. If you filled the paper form, you will need to hand it in person to a bank or credit union representative. Provide the necessary proof when required.
- Receive an acceptance letter. Inside you will find the amount that was authorized, the interest rate and the period of time you have to cancel.
Apply for a Personal Loan with a Low Credit ScoreIf your credit score is low (under 650), you will probably not qualify for a personal loan in every institution because you are considered high risk and the chances that you will pay back the money are low.
If an institution decides to loan you money, make sure to check the interest rate because the amount will likely be higher than it would be if your credit score was standard.
Also, you may be required to put a house or car as collateral to get the loan. This means that if you don't make the payments for the loan, you may lose that property or vehicle.
Whichever the case, good or bad credit, you always need to compare interest rates, loan terms and requirements to make sure you are getting the best deal possible.
To learn about the best loans in the market, check out this article in Nerd Wallet.