- Assess your financial situation. Before you apply for a personal loan, look through your current finances. Are you in a position to pay back your debt before the repayment terms are up? Or will an additional source of income, such as a second job, get you the money you need without taking on a personal loan?
- Decide how much money you need. Once you’ve established that you could use a financial supplement, figure out how much money you need. The more you borrow, the higher your monthly payments will be. But if your personal loan can pay off another high-interest debt, the application could be worth it.
- Know your credit score. Your credit score is an important factor in the interest rates you’ll be quoted. Some banks offer free credit score checks for their customers, or you could use a third-party site, such as or .
- Choose your lender type. You can fund your loan through traditional banks, credit unions, online lenders or peer-to-peer networks. Your credit history, how quickly you need your money, the interest rates you can repay and your https://installmentloansgroup.com/installment-loans-ne/ ability to apply online or in person should all be factored into your decision.
- Pull together prequalification documents. As with any loan, you will need to show lenders your full financial situation. Gather any paperwork such as identification, recent bank statements, any mortgage or existing loan documents, such as car repayments and credit card statements, to speed up your loan application.
- Compare the best interest rates. Once you’ve determined your lender type, use online calculators and/or set up prequalification meetings with different lenders. Present your loan amount and the payment terms you want so lenders can quote you their best interest rates.
- Check pros and cons. Once you’ve checked potential rates with several lenders, you may want to put together a list of pros and cons outside of interest rates. Some lenders offer interest-free months for consistent payments, or allow you to make direct deposit payments straight from your bank.
- Apply for your loan. Once you’ve chosen your lender, you’ll need to formally apply for your loan. In addition to your prequalification documents, your lender will have an application form or process for you to complete.
- Receive your loan funds. After your loan is approved, you’ll get your money. Make sure you’ve sent over the correct account and routing numbers for the bank account in which you want to accept your funding.
- Begin making payments. Many lenders offer incentives for borrowers who set up automated payments to cover their monthly installments. If you’re in a position to set up autopay, you’ll also feel better knowing that you don’t have to worry each month about overlooking a payment.
What if you have bad credit?
Borrowers with poor credit may need to watch out for high interest rates. They may also find themselves ineligible for many loans that would be available for borrowers with higher credit scores.
But not all is lost. Some lenders consider financial factors outside of credit score alone. You may also seek out lenders that will consider cosigners or guarantors who can vouch for your loan repayment.
Personal loan alternatives to consider
Sometimes borrowing against your retirement savings or house can make sense. But you need to think twice before you commit to these collateral options, as these loans can have pretty dire consequences if you can’t repay your debt.
You might not need a personal loan to get the money you need. Here are some alternatives that can get you through a tight financial time. Below, you’ll see a table of your options, as well as longer summaries for how to utilize each alternative.