Personal Finance: Our Guide to Applying for a Personal Loan
If you are struggling financially or need extra cash for an unexpected purchase, there are many options available for you. You may opt for a simple personal loan, which is an unsecured loan that you will pay off with interest over two to five years.
Personal loans aren’t backed with collateral, so you don’t have to give up any assets when you borrow money. Instead, you just have to pay the interest set by your lender of choice. Interest rates for personal loans can range from 6% to 36% (the national average in 2019 was 9.41%) depending on your credit score, income, and existing debt.
Benefits of Applying for a Personal Loan
One of the most common reasons to take out a personal loan is to manage and consolidate high-interest debt. With a good credit score, you can get relatively low interest rates for your personal loan. Monthly payments will be much easier to manage as opposed to the soaring rates of other types of debt.
Personal loans can also finance the purchase of big-ticket items such as furniture, essential appliances, travel expenses, gadgets, and more.
Applying for a Personal Loan
Here are three simple steps you have to take to apply and qualify for a personal loan:
1. Make Sure It Is Right for You
The first thing you need to consider is how much you need to borrow and if a personal loan is the best type of loan available to you. If you need money to buy a car, an auto loan may have lower interest rates over an extended period. If you want to buy a laptop or an expensive appliance for your home, you can use a credit card with 0% interest instead. If you only need a small amount of capital, you can ask close friends or family members instead.
If you opt for a personal loan, remember that you are paying interest on top of the principal amount. When you calculate the final amount of the loan, always include the interest. Most importantly, make sure you will be able to complete all payments in time.
2. Check Your Credit Score
The central element of your personal loan application is your credit score. Before you apply for a personal loan, collect an updated credit report from a credit reporting agency. You can get this for free through various websites and online agencies.
When you have your credit report in hand, you will have a better idea of what loan terms and rates your potential lenders will offer. As a general benchmark, you will get more favorable rates if your credit score is above 600.
3. Choose the Best Loan Details
Terms will vary significantly among different lenders, so make sure to shop around for the best offer. These are important details you should compare:
Annual percentage rate (APR) and term – What interest rate and timeframe do they offer? Are the interest rates fixed or variable? Choose a lender that offers terms that best suit your financial capacity.
Penalties and fees – Many lenders have origination fees that you have to pay on top of everything else. Additionally, you may incur penalties for late payments. If you pay your loan off early, you may also have prepayment penalties.
Automatic withdrawal – Some lenders may offer lower interest rates if you opt for automatic withdrawals for your payments.
Conclusion
Personal loan terms and rates are granted depending on your credit score, income, and existing debt. As you go through the qualifying and pre-approval process, line up your potential lenders and compare their offers. Choose the terms that will suit your financial situation well and incur the lowest fees over time.
Central Loan & Finance offers a selection of ,personal loans in Atlanta, GA. We have been serving the city since 1967, and we believe in helping our clients in their time of need. Your well-being is our highest priority. Contact us to begin your application process today!