The decision to take a personal loan is a huge one. We could be making it because we need to purchase an asset like a car, renovate our home, or pay some of our debts. The fact that the loan can improve our current financial situation and allow us to make some worthwhile lifestyle changes doesn’t mean we should throw all caution to the wind.
Before taking a personal loan, we must answer the five questions below. They help us understand the personal loan application process, what we’ll have to deal with after borrowing the money, and confirm that we’re making the right decision.
1. How Much Do I Need To Borrow?
We must decide on the amount of money we need before contacting any financial institution for a personal loan. Different lenders have set various minimum borrowing limits, which range from $500 to $2,000. A few things determine how much cash we need and what our lender is willing to offer us. For instance, if we want the money for debt consolidation, we have to consider the total amount of our multiple debts. Besides, our lender has to put our credit score in to account before they determine the minimum or maximum amount they are willing to lend us.
2. When Will I Get The Money?
After applying for the personal loan, it might take a while for us to access the money. The loan application time frame will come into play here. The loan amount might also determine how long we have to wait until the money is in our bank accounts. Sometimes, our lenders can process our loans within two days, but they might take longer.
3. What’s The Interest Rate on My Personal Loan?
This is a fundamental question to ask ourselves before taking a personal loan. The interest rate on our personal loan may be dependent on factors such as:
- Our credit score
- Our credit history
- Loan repayment period
- Payment frequency
- Loan amount/size
Our loan interest rate can be anything between 3.49% and 29.99% or more, depending on the points I’ve mentioned above and our lenders. We must know the interest rate on our loan before submitting the required paperwork. This way, we understand what we’re signing up for.
4. What Is Required Of Me After Getting The Loan?
It is also essential to know what we have to do after we have taken a personal loan. The most obvious thing is to spend the money as intended, but there’s more. We must understand our repayment plan and develop an effective strategy to execute it without impacting our lives too much. At this point, we should make an effort to know the following details.
- When to start repaying the personal loan?
- Are there prepayment penalties?
- What happens when I miss a payment?
5. Can I Fully Trust My Lender?
We should confirm that we can trust our lenders and rely on them before applying for a personal loan. This ensures that we get the best deals, and the personal loan’s terms do not change after we have signed the paperwork. Here’s are some of the signs of a trustworthy lender.
- They check our payment history and credit score
- They have a physical address
- They have a secure, full-fledged website
- They don’t pressure us to sign the paperwork
- They explain the loan’s fees to us before we apply for the loan
- They are registered in our state
- They have an excellent reputation and lots of positive reviews from previous clients
When we want a stress-free personal loan application process, we must ask ourselves the five questions above. We also have to research the loans and understand everything about them to know what we’re getting ourselves into.
