How to get a personal loan
While inflation may finally be cooling off and cuts to interest rates now appear imminent, it doesn't necessarily mean that the economic burdens of the last few years will automatically be relieved. Inflation hit its highest point in decades in 2022 and interest rates are still frozen at their highest level in 23 years. Against this backdrop, many Americans still find themselves looking for ways to make ends meet. And credit cards, with average interest rates hovering past 20% right now, are often not one of the better ways to do so.
Fortunately, personal loans can help.
These loans, opened with a bank, credit union or other lending institution, have multiple benefits for borrowers in today's unique economic climate. And those benefits, like a lower interest rate than credit cards, could soon become even more substantial. But how can borrowers go about securing a personal loan right now? That's what we'll break down below.
See how low of a personal loan interest rate you could lock in here now.
How to get a personal loan
Securing a personal loan doesn't need to be difficult and it can be fairly quick, as some lenders will disburse the funds you qualify for in just a few days. But the process will be smoother if you take a step-by-step approach. Here's how to go about getting a personal loan now:
Understand what you need it for
Knowing what you need a loan for will help you determine how much you need to borrow. Personal loans can help cover a wide range of expenses but they should still be approached with the same caution that you would take with any other credit product. So only borrow as much as you need and only as much as you can comfortably afford to pay back.
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Review your credit score
The best personal loan interest rates and repayment terms will be reserved for applicants with the highest credit scores and lowest debt-to-income ratios. So be sure to review your credit score and boost it as high as possible before applying. It could also be smart to request a free copy of your credit report to make sure it accurately reflects your current credit health.
Get your documents in order
Different lenders will want different documents, but you'll generally want to gather proof of income, proof of address, multiple forms of identity and your Social Security number or Social Security identification card. You may need more or less documentation depending on which lender you ultimately choose. Still, by having these documents (at a minimum) ready to submit when requested, you'll be in a better position to speed up the approval and disbursement phases of the process.
Start shopping for lenders
Just like you wouldn't purchase the first car you test-drove or the first home you saw when homebuying, you shouldn't necessarily take the first personal loan offer you see. Instead, shop around to see which lenders are offering the best rates and terms – and which only seem like they are. And be sure to read the fine print for any fees or requirements that could easily negate any savings you think you're getting with a below-average interest rate. Consider getting quotes from at least three different lenders to complete an accurate comparison.
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Apply for pre-qualification
Once you've narrowed down the lenders you'll want to apply for pre-qualification with each. And don't worry about doing damage to your credit score as this phase will only require a soft credit check. A deeper look at your credit will occur when you formally apply. Many lenders will allow you to complete a prequalification form directly on their website.
Compare offers
This is the final stage before formally applying. Compare the offers you've received to determine which is the best for your particular financial need. But don't just look at the interest rates. Look for fees like prepayment penalties and origination fees. Compare repayment terms and the overall loan term offer, too. And while most personal loans come with fixed interest rates, you may get offers with variable rates as well, so you'll want to carefully consider both. Once you determine which is truly best, you can easily complete the formal application online, which should be relatively easy to finish if you've already set up a borrower profile with that lender.
The bottom line
Applying for a personal loan isn't hard but it should be approached with care. After all, you are borrowing money, perhaps in a significant amount, so the interest rate, repayment terms and other factors mentioned above will all need to be carefully weighed against one another. By taking a diligent approach in the application process you'll improve your chances of success over the full repayment period, too.
