Increasingly, personal loans are growing in popularity, with approximately 20.2 million borrowers in the U. S. UU. According to Online Loan Marketplace Lending Tree.
If you are considering taking out a personal loan, it is important to be well prepared and informed. Select offers 10 questions to ask yourself to ensure you are ready for a new personal loan. A personal loan from Marcus by Goldman Sachs may be a good option if you are looking for a free personal loan to finance debt consolidation. Marcus allows you to send money to up to 10 creditors and then deposit any additional money you borrow directly into your linked bank account.
Your interest rate depends on several factors, including your credit rating, the amount of the loan, and its term (how long you will repay the loan). Interest rates can be as low as 3.49% and as high as 29.99% or higher. Typically, you'll get the lowest interest rate when you have a good or great credit score and choose the shortest possible repayment term. According to the most recent Fed data, the average APR for 24-month personal loans is 9.39%. This is often well below the average APR for credit cards, which is why many consumers use loans to refinance credit card debt.
When you apply for a personal loan, you have the opportunity to choose which repayment plan works best for your income level and cash flow. Lenders sometimes offer an incentive to use autopay, reducing your APR by 0.25% or 0.50%.With a limited-time 0% promotional APR, a balance transfer card allows you to pay zero interest for up to 21 months, allowing you to easily save hundreds. Some personal loan lenders, such as LightStream, deliver funds electronically the same day it's approved; Discover Personal Loans will deliver funds the next business day. Other lenders need up to 10 business days.
If quick access to money is important to your situation, be sure to select lenders with fast delivery. While taking out an installment loan won't increase your score much, using a personal loan to pay off revolving debt will cause the most noticeable increase in your credit score. Once you pay for your cards, keep your expenses below 10% of your available credit and see the difference this makes. Call the customer service numbers on the back of your credit cards and request an increase. You have a better chance if your income has increased since you purchased the card and if you haven't missed any payments. Multi-lender prequalification allows you to compare estimated rates and payment amounts.
The lender will perform a strict credit check that may briefly lower your credit ratings by some points and will appear on credit reports for 24 months. After final approval, you will receive your funds according to the lender's terms, usually within a week.
Questions To Ask Yourself Before Getting A Personal LoanFor answers to these and other questions, Investopedia spoke with Linda M. Hooks, head of the Department of Economics at the University of Washington and Lee in Lexington, Virginia. In addition to directing the largest department in Washington and Lee, Dr.
Hooks has conducted and published research in a variety of economic areas.
- What is my debt-to-income ratio?
As a general rule, borrowers should aim to spend no more than 35% to 43% on debt, including mortgages, car loans, and personal loan payments.
- Can I use collateral?
Sometimes, it's possible to use collateral for a personal loan, and this can help you qualify for a personal loan or a better loan rate.
- Do I need a co-signer?
The fact that you asked how to get approved for a personal loan means that you are going to be armed with knowledge. If you can't find a co-signer, or the lenders you're considering don't allow co-signers, you may have the option of getting a secured personal loan instead of an unsecured one.
- What is my repayment plan?
It's essential that you have a clear repayment plan, whether you want to apply for a personal loan to consolidate debt, finance a home improvement, finance your next big trip, or pay for a move to another country.
- Where do I apply?
Alternatively, some lenders may ask you to apply in person at your local bank or at your credit union branch.
- What are my options?
If you've decided that a personal loan is the right type of financing for you, follow these eight steps to apply for it. If you apply for a secured personal loan, your lender will require you to pay valuable assets or collateral.
- How do I compare prices?
Take the time to compare prices to get approved for a personal loan that fits your financial situation, that is worth obtaining, and that benefits you the most.
- What information do I need?
However, in general, you'll need to provide basic personal information, how much you want to borrow, and the purpose of the loan.
The last thing you or the lenders want is for you to apply for a personal loan and not be able to repay it. Depending on your creditworthiness, you may need a co-signer to get approved for a personal loan with a decent interest rate. Regardless of the reason you need a personal loan, compare lenders to see which one offers the best deal for your needs.