When applying for a loan, you want to pick the best deal possible financier and plan to make the best out of the amount and avoid being plunged into financial trouble. As such, deep care must be taken during the application process. The three step-process in this article describes various activities that the applicant should carry out to ensure a smooth application and post-approval period.
Step 1: Perform Due Diligence
This stage involves various prequalification activities that help you get an estimate of your credit worthiness. At this stage you want to have a crystal clear picture of your creditworthiness and a plan for spending the loan amount when it is disbursed. The first thing you should do is determine the loan amount that you need. You should know what you need the money for and have a clear outlook as to how you will spend it. Next check your credit score to get an idea of how reliable you are as a borrower. You might want to see a copy of your credit report to purge errors that might negatively affect your credit score. In order to maximize your credit score, you can pay your outstanding debts from things like credit cards, payday loans and bills. An excellent credit score is one above 700 but anything below 650 is considered poor and may require you to have collateral in order to access a personal loan.
Your pre qualification check with various lenders will tell you the amount that you qualify for and the interest rates, fees and repayment terms that apply. If you contact your lender for prequalification, they will do a soft check with a credit bureau, but this will not affect your credit score. The bank will then provide a breakdown the loan size that you are eligible for. By carefully reviewing the terms and amount that they offer and doing extensive background checks on each institution you can determine which offerings are legitimate and best suited for you. Make sure to include as many financial institutions as possible including non-traditional banks, as these tend to offer better interest rates and qualification terms.
Step 2: Make Necessary Preparations
After getting prequalified, it is time to select the most suitable loan offerings in terms of repayment terms and ability to meet your financial needs. The process of application will require you to fill out an application form and provide a number of documents covering your identification, employment and financial history among others. Many banks allow you to complete this process online, but you may have to visit a physical branch and even talk to a credit manager. You should check that all your information and documents are up to date and legal. Before handing in the loan application, it is important to read carefully through all the terms including the fine print as you may be subjected to unprecedented costs and fees relating to the loan. Many unscrupulous lenders prey on unsuspecting customers by dangling an extremely attractive loan package, only for the terms to change after the borrower has signed the contract and accepted the financing.
Step 3: Submit the Application
Moving on to this final step happens after you have met all the prequalification steps and you are sure you possess the wherewithal and ability to service the loan. When you hand in your application, the lender will conduct a hard inquiry with the credit bureau and this lowers your credit score by a few points. For this reason, it is best to avoid applying too many times to different banks, as each hard inquiry will show up on your credit report. The bank will then review your financial information and documents, after which the loan is either approved or denied.
If approved, you will need to sign a loan agreement form after which the loan will be deposited to your account. The disbursal may take anywhere from a matter of minutes all the way to a week. Depending on the terms of the loan, you might need to start thinking about remitting the first repayment installment within the first 30 days. This may be deposited directly or it can be remitted from your salary account.
1. https://www.experian.com/blogs/ask-experian/personal-loans-what-to-know-before-you-apply/ 2. https://www.wikihow.com/Apply-for-Personal-Loans 3. https://www.nerdwallet.com/blog/loans/how-to-apply-for-a-loan/ 4. https://www.moneyunder30.com/how-to-apply-for-a-personal-loan 5. https://www.finder.com/personal-loans-how-to-apply