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How You Should Apply for a Loan

Loans can help you finance items such as cars or larger appliances when you don't have the cash on hand for them or help your small business receive capital to expand operations. After finding the financial institution in which you want to receive financing from here are some tips on how to apply for a personal loan.

Apply for a Loan

When you apply for a personal loan, you can fill out an application in multiple ways. Most banks and credit unions allow you to do this when you visit a local branch, through a secured application online or even by just calling in to speak with a representative. At the time of the application, it's important that you have the information they will need to process the application. This will include your source and amount of income, your social security number and pertinent information such as how much you pay in rent or mortgage monthly and the amount you wish to borrow.

How You Should Apply for a Loan

Apply for a Personal Loan

Before you apply for personal loans, it's important that you do several things. First, you'll want to receive a free credit report from each of the three credit bureaus to ensure the information on them is correct. Since financial institutions use your credit reports as a barometer on the likelihood of you repaying the loan, any incorrect information could reduce your chances of receiving approval.

A good rule of thumb is for you to borrow the least amount you need. Instead of opting for the maximum amount, try to save anywhere from a third to half of the amount you need for items such as appliances and one fifth for things like a vehicle. The reason for this is the less you borrow the less you have to pay in interest on the loan. More importantly, by making saving a priority before borrowing, it can help you build this behavior while also lessening your reliance on using loans.

Apply for Personal Loans Online

When you are ready to apply and plan to do it online, there are several things to consider. For starters, you'll want to check your lender's internet address; if it begins with https then it's safer, as this signifies a secure connection. Next, do not apply for a loan if you are using Wi-Fi in a public area such as a library or coffeehouse since it's easier for other users to access your information. Instead, apply from the comfort of your home and if you don't have internet there visit or contact by phone the lender to apply.

Before you apply for a loan of any sorts, it's imperative that you consider these things first:

  • Is the need for the loan essential or is it a want? For illustration purposes say you want a new TV and you plan on taking out a loan for this. Instead of taking this route, plan out how much you need then set a savings goal to attain it in a specified time.
  • If your loan is essential, do you have the credit to receive a good rate? If your credit score falls below 600, you might still qualify for a loan, but you will receive a subprime rate meaning you'll pay significantly more to borrow. Therefore, if you have a lower credit score you should be mindful of this before applying and limit the amount you need to borrow. Additionally, if you have a trusted relative or friend that has a good credit score consider asking them to co-sign so you receive a better rate.
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