Certain financial institutions have made it possible to qualify for a loan despite your credit rating.
Understanding a Personal Loan
A personal loan is a loan paid back in installments, and they are typically obtained to handle smaller personal expenses. You can receive a personal loan from multiple financial institutions and banks, including online lenders and credit unions.
You can get these personal loans either secured or unsecured. With a secured personal loan, you’re pledging an asset (such as your home or personal property) against the loan. That usually signifies less risk and also leads to better terms than unsecured loans. Unsecured loans mean there’s no collateral provided for the loan. The rate and duration of the loan are based on your overall creditworthiness.
For a personal loan, what is the credit score needed?
This can actually vary based on the individual requirements of every lender. However, below is a high-level overview of what the ranges tend to be and what to expect when it comes to submitting an application for a personal loan.
- Poor or Weak Credit Scores (Below 640)
This is the difficult range to get any type of personal loan, unsecured or without help. You may need to get someone with better credit to act as your co-signer. Regardless this will lead to higher loan rates due to the poor credit score.
- Fair (between 640 to 699)
Here your chances of getting a personal loan drastically improve. This time around, with a co-signer, it helps you to get a lower rate and better terms, so it’s something to consider.
- Good (from 700 up to 749):
Now you won’t need to get yourself a co-signer, and you’ll also start to get several loan options to consider when obtaining your personal loan. Here you’ll find almost the best rates possible.
- Excellent (750+):
Now you’ll get the best of all worlds. With this credit score you will get the highest limits possible and also tend to get the lowest interest rates they offer. This is coupled with you getting offers from multiple vendors easily to review.
What else is needed to get a personal loan?
Besides just having good credit or better, there are two other factors that will need to be taken into consideration.
- Proof of income
As mentioned earlier, lenders want to review a complete package, which includes checking the ability to repay the loan through a stable income. That means lenders will want to see paystubs or w2 forms to assess how much they can offer you as well.
- Debt to income (DTI) ratio at a low
DTI helps lenders see how much other outstanding debt you have and what those monthly payments look like. The lower the DTI, the better, and some lenders have specific requirements for that ratio.
Steps to applying for a personal loan
There are some steps to follow for your personal loan application.
- Do your research
- Make sure to work with verified lenders and check their loan terms and rates. You want to ensure they aren’t predatory.
- Select the appropriate loan
- Once you find lenders that you’re comfortable with and you’ve done the appropriate research it’s time to select a loan that suits your needs. But again, make sure to borrow only what is needed.
- Submit the application
- Complete and fill out all the necessary forms and submit whatever documents are required. Once that’s done you should get feedback and, more importantly – receive funding.
Additional benefits of personal loans
- Consolidation of debt
Typically, you can take out enough to consolidate all your miscellaneous debts into only one monthly payment. This helps you repay everything down easier and faster.
- Rates are fixed
While you’re consolidating, you will have a monthly payment that won’t change. Most personal loans will come with fixed rates during the term of the loans.
- Can cover major expenses
Personal loans are there to cover expenses that are too large to either pay upfront or even put on a credit card. These can be for weddings, medical bills, and even home improvements.
- Can come unsecured
That means no assets need to be put up to secure the loan, which means no collateral. While this may lead to a higher rate, it will also mean no concerns about losing assets in case the loan cannot be repaid.
Disclaimer : All loans and credit cards are subject to credit and underwriting approval. ConsumersAware.org is an information blog and a search platform, not a lender. ConsumersAware.org only works with advertiser partners and networks that comply with laws and regulations of Canada, Singapour, United Kingdom, United States, Australia, and New Zealand. Credit cards range from $500 to $50,000 with Annual percentage rates (APRs) range from 12.5% to 19.9% and depend on the assessment of your credit profile. Loans range from $500 to $50,000 with terms ranging from 12 months to 60 months or more. Loans APRs range from 5.99% to 29.8% and depend on the assessment of your credit profile. For example, for a $7,500 loan paid monthly over 24 months, a person would pay $332.40 per month for a total of $7,977.60 over the course of the entire loan period.
