How to Get a Personal Loan in 5 Steps
If you need a personal loan but aren’t sure where to start, this comprehensive guide will walk you through the process of getting a personal loan in five steps.
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Step 1: Check your credit score and review your credit report
Before you start shopping for a personal loan, check your credit score and review your credit report. Your credit score is a key factor that determines the interest rate you'll be offered by lenders, so it's important to know your score.
You can check your credit score and obtain a copy of your credit report from one of the three major credit bureaus (Equifax, Experian, and TransUnion) for free once a year. If you have a low credit score, now's the time to work on improving it.
Step 2: Calculate your loan payments and determine affordability
Once you know your credit score, use an online personal loan calculator to estimate your monthly payments based on the amount you need to borrow, the interest rate and the repayment period. This will help you determine whether you can afford the loan and give you an idea of how much you'll pay in interest over the life of the loan.
Step 3: Get pre-qualified and compare loan options
Getting pre-qualified for a personal loan will give you a sense of what interest rate, loan amount and term you'll qualify for. It's a good idea to get pre-qualified with multiple lenders — including banks, online lenders and credit unions — to compare rates and specific loan features. Pre-qualifying typically involves a soft credit check, which doesn’t hurt your credit score.
Step 4: Read the loan terms and conditions carefully
Once you've decided on a lender, read the loan terms and conditions carefully. Make sure you understand the fine print, including the annual percentage rate, repayment period, any fees or penalties and the consequences of missing payments or defaulting on the loan.
Step 5: Submit your application and follow up with lenders
Finally, submit your formal loan application and any documents the lender needs to verify your information. Once approved, you should receive the loan proceeds in your bank account within a few days. Your first payment will likely be due in 30 days. Be sure to make payments on time to avoid late fees or negative marks on your credit report.