What to Do Before Applying for a Personal Loan 

Are you having problems with money? 

Do you need to do something important but you have no money for it (e.g. repair or renovate your home)? 

Do you have to make a major purchase but you’re a little short on money? 

If you answer yes to any of these questions, you might want to consider taking out a personal loan.  

What is a personal loan? 

A personal loan is a type of loan that comes with a fixed interest rate, and should be paid within a fixed period. The monthly payment is also fixed so you know how much exactly you will pay for each month.  

But as with any other type of loan, you have to do ample preparations to ensure that your loan application gets approved.  

Improving your credit rating  

One of the first things that lenders look at is the borrower’s credit rating. Each person with debt history received a credit score, which determines his/her financial responsibility. The higher the credit score is, the better his/her ability to make loan repayments. This is why, it’s important that you maintain a high score, or improve your score if it’s low to get higher chances of approval.  

Some of the things that you can do improve your credit rating include: 

  • Check your credit report – Go to websites such as TransUnion to get a free copy of your credit report. Here, you can see if there have been any mistake that might be the reason why your score is low. Dispute or file a complaint to have the error deleted. Deleting the error will help improve your credit rating.  
  • Avoid using your credit card – If you already have plenty debts to pay for, it’s wise that you avoid using your credit card as this will only get you into more trouble. Always pay with cash for every transaction that you make to improve your credit history. 
  • Pay your bills on time – Of course, it’s imperative that you pay all your bills on time. If you are having a hard time doing so, it helps to set up reminders so you don’t forget to pay. 

Looking for the best option 

If you look around, you’ll find that there are many personal loan options that you can choose from. It’s never a good idea to go for the first one that you encounter, as there might be better options out there in terms of interest rates and other features.  

Consider these tips to find the best personal loan: 

  • Shop around – The internet has made loan shopping a lot easier. Instead of going from one lender to another, you simply have to browse through different websites and submit an online inquiry. Some websites even have real-time customer support so you can immediately get the quotation that you need.  
  • Compare the costs – There are many costs that you have to look at when comparing various loan options. Aside from the interest rate, you also have to look at the annual percentage rate (APR), origination fee, and other costs that come with the loan.  
  • Read the fine print – When it comes to loans and other financial products, you always have to read the fine print. In fact, the smaller the print is, the more important it is for you to read and understand.  This contains highly valuable information that you should know about as this will affect your overall decision. 
  • Read reviews – Be sure to read the reviews for the lender that you’re eyeing for. This way, you’ll know if the lender treats the borrowers fairly, and if he/she is attentive to the borrower’s issues and concerns.  

Preparing the documents that you need 

Once you’ve chosen the right personal loan option, the next thing you have to do is to prepare the documents needed for the loan application. These include the following: 

  • Application form 
  • Income statement (bank statements, payment stubs and so on) 
  • Credit report 
  • Identification documents 

Getting a personal loan is now easier than before. But you still have to do your part during the preparation process to help increase your chances of approval. Not only will you need to prepare the necessary documents, you should also take the time to improve your credit rating as this is one of the first things that lenders to look at to determine your creditworthiness.