NigCareers

Looking for Personal loans?

When it comes to personal loans, you need to do your homework very well if you don’t want your application rejected. If you have ever been turned down when you applied for personal loan, you will understand the pain involved. Before anyone will apply for a personal loan, he must have set his mind on one thing or the other to do with the money. This is what is being referred to as expectation. What happens when the loan is not granted? You will not only be unable to do what you have planned to do with the proceeds. Any time you apply for loan or credit, it is reported to the credit bureaus. This is a hard inquiry of course which is capable of reducing your credit score with few points. The situation is made worse if the application for the personal loan is declined. However, if you know what to do, you can as well get your personal loan application approved quickly. If you desire quick personal loan, no one will deny you if you meet the requirements. Below are some practical steps anybody that desires quick personal loan can take.

Be specific about your reason for the personal loan you want to take: People use personal loans for various reasons. I may not know why you need personal loan but it is likely that you need it for car purchase, holiday, home renovations, wedding, debt consolidation, medical expenses, furniture and appliance replacement. You should be able to understand your preferences. Once you can determine why you need a personal loan, you can take it a step further by finding out the cost estimate of what you want to do. The best way to achieve this is by requesting for quotes from various suppliers or vendors. Alternatively, you can search online to search for the prices of whatever you want to buy with the loan. In fact, this singular step will let the lender know that you have done your homework. This will let the lender to know that you understand what you needs.

Read Also: Online Loans: How to apply for payday loans online

Check your credit score: Your credit score is one of the factors any lender will consider before your application for personal loan can be considered at all. You can request for your credit report from the credit bureau. You may not need to pay for this as you are entitled to one free credit report from each of the three major credit bureaus in a year. When you receive the report, ensure that you study it. If you notice any error or any transaction you didn’t approve, which may have a negative impact on your credit, you can bring this to the attention of the credit bureau to investigate and request for correction. It is good that you investigate transactions you didn’t authorise even when it is obvious that it doesn’t hurt your credit because it may be a red flag of identity theft. If your credit score is too low for the personal loan you want to obtain, you don’t need to bother yourself with the application for now. Your primary responsibility at this point is to ensure you improve your credit score. Don’t apply for a loan with credit score requirement that is beyond your credit score. It will be nice if you can create a checklist of what to do in order to improve your credit score. Just at a glance, let me point you to some things you can do to improve your credit score:

• Make prompt payments: If you carry balance on your credit cards, making minimum payments may not help you improve your credit. It is better to make full payment of any amount due on a monthly basis. If you have problem with remembering your payment dates, you can set alerts or reminders in your calendars. You can also instruct your lenders or card issuers to send you reminders on monthly basis. If you know you will always have sufficient funds in your account, you can authorise automatic payments. But this should be done with caution. In case you don’t have sufficient funds in your account at the payment date, this can lead to missed payments. This will further ding your credit score. Missed or late payments can stay in your credit report as long as seven years. Your credit history account for 35% of your credit score. Therefore, you should handle this aspect very carefully.
• Lower your credit utilization ratio: Credit utilization ratio is proportion of your card balances to your overall credit limits. Credit bureaus are not only interested in the credit utilization ratio of your individual credit cards, they also consider your overall credit utilization ratio. In order to have or improve your credit score, you should try as much as possible to keep your credit utilization ratio below 30%. For people that want to increase their credit score fast, lowering your credit utilization ratio can help you gain few points.
• Pay off your debts: If you are carrying debts, it makes sense to pay off some of the debts first or at least lower the debts amount. If you already have huge debts, lenders may be unwilling to approve new personal loans as they will believe that you might not be able to pay back the loan. If your debt to income ratio is quite high, this increases the risk exposure of the lender. There is a tendency that you may not be able to pay back the loan or there may be incidence of missed or delayed payments. Paying off the debts with the highest interest rates will help you reduce your interest expenses. Chunk amount of your subsequent payments can be channelled towards reducing the principal. Nevertheless, if you can provide collateral, it will increase your chance of getting the loan fast.

Read Also: Bad Credit and How to avoid or Fix it

Shop around: If you want a personal loan at a good deal, you can consider shopping around. With many companies offering personal loans online, you can get different quotes with just one application. Most of the online platforms for personal loans have advanced search tools that you can easily use to filter loans by type, rate and terms.  Another beauty of this is that if you do all your online shopping within a very short interval, credit bureaus will treat the inquiries for your credit coming from different lenders as a single transaction. Therefore, your credit score will not necessarily be negatively affected. How do you shop for personal loans? It is important to mention that you are not just shopping for personal loan rates. While interest rates are very vital factor you should consider as it contributes to how much you will need to be paying back on a monthly basis, there are other factors you need to take into consideration. The factors you need to compare while shopping for personal loans are:

• Origination fee: Some lending companies may require you to pay an upfront fee for the processing of your personal loan. They charge origination fee to cover cost of the research, paper works and other closing costs your lender has incurred on you as a borrower. This cost usually ranges between 1% and 5% of the total loan amount. This becomes additional cost to you. Unfortunately, lenders will only advertise interest rates leaving origination fee behind. That is why borrowers should not focus just on interest rates when comparing personal loan offers. Instead, you should pay more attention on the annual percentage rates (apr) of the loans. This will give you a fair knowledge about what the total costs of the loan will be to you. In most cases, you will notice that the lending companies that don’t charge high interest rates charge origination fee while the ones that don’t charge origination fee may likely charge high interest rate. Therefore, it is good that you know how to compare apples with apples.
• Prepayment penalties: Personal loans are instalment loans. This means that you will be expected to pay certain amount on a monthly basis over a period of time in order to liquidate the entire loan amount including the interest thereon. Personal loans usually have specific terms say five or ten years. However, supposing you want to pay off the loans more quickly in order to limit the interest you will have to pay on the loan. Will your lender allow prepayment? Some lending institutions will not allow you to make prepayment even when you have the money to pay. If you insist on the prepayment, you may be asked to pay prepayment fee. Prepayment fee may be too high at times to the extent that it may wipe off the savings you may be attempting to make on interest expenses. Therefore, you may need to ask if a lender allows prepayment or not.
• Interest rates: I still want to talk more about interest rates here. There are two types of interest rates namely fixed interest rates and variable interest rates. Variable interest rates mean that the interest rates on your loans tend to increase or decrease based on the prevailing index interest rate. On the other hand, fixed interest rates remains at the same level over the life of the loan. It does not change. That means you will pay equal amount regardless of any change in the market interest rates. Generally, variable interest rates are usually cheaper than fixed interest rates. Does that mean variable interest rates are better than fixed interest rates? Well, it depends. If there is likelihood that the market interest rate may fall in the near future, variable interest rates may be a good option. But if the current interest rate is very low and there is possibility that the market interest rate may soon increase, borrowers may want to lock in the low current interest rate by going for fixed interest rate. So, you have to be sure what type of interest rate you are been offered. Variable interest rate is common with student loans.
• Effect of inquiry on your credit score: Before you start filling any online application form for personal loans, you may need to ask if the inquiry on your credit will appear to your creditors or not. If it will appear to your creditors, this meant that it is a hard inquiry which is capable of reducing your credit score by a few points. But if the inquiry in going to appear to only you, it means that it is a soft inquiry and this may not have any effects on your credit.
• Discounts: Do you know that you can enjoy discount if you will be making automatic payments? Some lending institutions reward their customers for making automatic monthly payments as this reduces the stress of running after the customers at the end of every month. Discount can help you reduce the burden of interest payments.

Read Also: Interest Rates: How to get low interest rates on any loan

Select the lender that is right for you: Each lender will require a particular credit score for a specific credit limit. From the quotes you receive, you may find the one that matches your situation. If you apply for such, there is a possibility that the application may be granted. However, it is not enough that a lender is willing to give you enough credit limits; you should ensure that the company is transparent in its communication. All the terms and conditions attached to the loans must be communicated in clear language without any hidden charges. If there is anything you don’t understand, your lender should be ready to listen to you and explain things to you in details. They should have your interest at heart and not just after their interest charges. You need to beware of scammers when it comes to online personal loans. Scammers are taking undue advantage of unsuspecting consumers. In order to be sure that the company you are dealing with is not a scammer, you may need to verify the address of the company. If the company is not having any verifiable address, this can be a red flag. The activities of financial institutions are regulated. Therefore, you may want to ascertain that the company is licensed by the government. You can look up the company from the CSBS Directory of State Banking Departments.

Meet Eligibility Requirements: All personal loans have different eligibility requirements. If you don’t meet the requirements as laid down by the lenders, the odd is that you may not be considered for the loans: Some of the requirements that lending companies usually ask their customers to meet include the following:

• Age: Among all the personal loans I have ever come across, the common minimum age limit among them is 21 years old while the upper age limits hover between 60 and 65 years old. The minimum age requirement by your lender may be different as I have come across a company that set their own minimum age requirement at 25 years.
• Employment: If you are not productively engaged either as an employee or self-employed, no lender will be willing to grant personal loan to you. In addition, you may be expected to have worked for minimum number of certain years, say two years in your current job. This is to ensure that you have a stable job. It won’t be that you are granted a loan today and next month, you are out of job. Some lending companies may specify a minimum monthly income as part of their eligibility requirements.
• Credit Score: As mentioned before, your credit score will determine whether your application for personal loan will be granted or not. Having good credit rating increases the probability of getting loan with more flexible option on tenure, amount and interest rates. If you have good credit history, this increases the confidence that lenders will have on you that you will pay back your loan. People with good or excellent credit score stand a good chance of getting high credit limit and good interest rates.

Provide necessary documentation:    In addition to the information you must have provided on your application form for the personal loan, you will still be required to make certain documentation available. If you don’t want processing of your loan application to be delayed, it is good that you have the following documents readily available. The documents your lender may likely ask from you include photograph, age proof, ID proof, income proof, bank statement, residence proof and signature verification proof.

As part of the requirements for the personal loan, you need to provide your accurate personal information such as your full name, address and telephone number. As mentioned, lenders will request for your income information and any existing loans. This will help them to determine your debt to income ratio and your ability to repay the loan if granted. Also, they will be able to figure out the best repayment plan for the loan. Additional information such as utility bills, W-2s or tax return will also be helpful.

Read Also: Short Term Loan for Bad Credit – Payday Loan

Personal Loans for People with Bad Credit

If you have a bad credit, it may be difficult for you to obtain personal loans. This is because personal loans are granted on the basis of your credit score. That is, it does not require collateral. You don’t need to put up any assets as security for the loan in case of any default. This makes it difficult for people with not too good credit score to get personal loans. If you find yourself in this position, there are still some other steps you can take to get personal loans.

Offer Collateral: Generally, personal loans lending institutions look at credit score of borrowers to weigh their creditworthiness so as to determine their suitability for the loan. So, if your credit is bad and you still want to apply for personal loan, you can increase your chance of being considered by offering collateral. There are usually two types of personal loans namely secured personal loans and unsecured personal loans. In the case of secured collateral personal loans, you will need to provide collateral as security for the loan. This is to protect the lenders against possible default thereby making the loan less risky for them. It also serves as life line for borrowers that would have ordinarily be disqualified for personal loans as a result of their poor credit score. By providing collateral, borrowers may be able to have access to lower interest rates on personal loans. However, secured personal loans come with its disadvantage. In case of missed payments, this can be considered as default. This makes the borrowers to stand the risk of losing the asset pledged as security. Unsecured personal loans on the other hand do not require collateral. It only requires good or excellent credit score. Your credit score will determine the credit limits and interest rates the lenders will be willing to offer you.

Engage Co-signer: If it seems that all your efforts to get a personal loan is not yielding positive results, you might approach somebody with a good credit history and credit score to co-sign the loan for you. You must be a trustworthy person for you to be able to get someone who will cosign a loan for you.  The person may be your parent, friend or spouse. Even though you are the one getting the loan, the lender will recognise the co-signer as the one applying for the loan. Therefore your credit score is no longer a consideration for assessing your suitability for the loan. The effect of having someone cosigned a loan for you is that, the person is standing in for you in case of default on your part. If you default, the person will be held responsible for the repayment of the loan. That is why anybody that wants to act as a cosigner has to be careful and ensure that the beneficiary is a person that can be trusted who will not put him into trouble. Besides, when a person acts as a cosigner to a loan; his debt to income ratio will increase. This may prevent the person from getting new loans. On the part of the borrower, you may be asked for the immediate repayment of your loan balance if your loan enter default and your cosigner is dead or has become bankrupt.

 

Read Also: Line of Credit and its Advantages over Credit Cards

Advantages of Personal Loans

Among all other types of loans, personal loans still seems to be in a very high demand among consumers. This may be due to the advantages if offers. Some of the advantages of personal loans are discussed below:

Flexibility: If your personal loan is granted, you are free to use the proceeds on anything of importance to you. It can be used to finance wedding, vacation, home improvements, large purchase or medical expenses.

No Collateral: Generally, you are not required to provide any security before you can be granted personal loans. All that is needed is good credit score as a measure of your creditworthiness. This makes it safe as you don’t stand the risk of losing your personal properties in case of default. Secured personal loans just serve as alternatives for people with no good credit score which can qualify them for the normal unsecured personal loans.

Accessibility: If you are in a very tight financial situation and need money almost immediately, personal loans are easily accessible. You can apply for a personal loan and have it made available to you within 24 hours if you meet the requirements. With the help on online platform, you can complete the application in the comfort of your home.

Little documentation: The paperwork requirement is not that elaborate when compared with mortgage loans. That is one of the reasons the processing of application for personal loan can be completed within 24 hours.

Disadvantages of personal loans

This article will not be complete without mentioning that personal loans have disadvantages too. Few of these disadvantages are highlighted below:

Interest rates: Because personal loans do not require collateral, the interest rates are quite high when compared to mortgage loans. However, if you shop for personal loan online, you may be able to get good interest rates. Interest on personal loans can be cheaper than interest on credit cards.

Credit Score: The same way this can be an advantage to people with good and excellent credit score, it can be a disadvantage to people with bad credit score. If you have bad credit score, lenders may not grant personal loan to you.

Risk: Attention should not be directed to borrowers alone. Personal loans create a sort of risk to lenders as it no collateral is required on the part of the borrowers. The implication of no collateral which can serve as security to the lenders is that, if the borrowers default in payment, the lenders stand the risk of losing his money. Even if the lenders are able to collect the money back at the long run, it may involve hiring a collection agent. And the repayment as easy and quick as expected.

Conclusion

Before you take any personal loans, you need to figure out how you plan to repay the loan. Ask yourself if your current budget can accommodate the monthly payments without putting too much pressure on your finance. How much can you afford to pay pay per month? How long will it take you to pay off the entire loan? Is there any option you can exploit as an alternative to personal loans? What impact will the loan have on your debts to income ratio? It is always better to think through the whole thing before you take the loan. Some people do this after they have collected the loan. This is like putting the cart before the horse. It is all about your finance. A single mistake about loan can push you into a debt you may not be able to come out from easily. It is not easy to get out of debt the same way it is easy to go into it. If you think through the the whole thing properly, you may want to reduce the amount you are requesting for to a manageable amount. For example, if you consider taking a personal loan for vacation, you may want to stay at a more affordable hotel. Everything is all about planning.

Loans