Acquiring a personal monetary loan in today’s constrained economic environment is not as easy as in the recent pay, but is still achievable. A personal loan, by its name, is a financial loan to an individual, a couple, or an individual with a co-signer. These types of loans are available without collateral, known as unsecured, or with collateral, known as secured. There is information that people will need to have ready about their own financial situation when applying for monetary loans. There are also things that people need to know about how lending institutions rate loan applications.
Regardless of the path that someone uses to obtain personal monetary assistance, the financial institution, at a minimum, will want to have a credit score report, a few pay statements to validate proof of employment and length of employment, and a list of any fixed monthly obligations. Depending on the loan guidelines at any particular institution, an applicant may need to supply proof of filing taxes, a valid driver’s license, and one or two monthly banking statements. It is to the applicant’s advantage to have this information available when either going to a physical location, applying online, or using a telephone.
The interest rates on unsecured loans are higher because there is no collateral to back up the loan’s value if the borrower defaults on payments. Conversely, the interest rates on secured loans are lower because of the value of the collateral. Easy research that anyone can do to help decide which type of lending firm to use is to check the average interest rates in the local area; check the upper and lower limits for adjustable rates; check the rates for secured and unsecured loans; check for any additional loan fees for either early pay offs or late payments. Surprise expenses at the time of a loan signing can leave a negative impression of the lending institute and may even result in a cancelled transaction.
Another good thing to know is what the terms for repayment are. A small loan could possibly be repaid in one or a few payments spread over a couple of months. Other loans for larger amounts may require payments that range from a few months to several years.
Lending Institution Information
The top three conventional avenues for personal loans are commercial banks, credit unions and financial loan organizations. All of these institutions will require some, if not all, of the applicant’s personal financial information. Regardless of the financial paperwork available, all three will rely heavily on the credit report. The higher the credit score, the better chance of someone being approved for a loan. The credit score is also a determining factor in the interest rate applied to a loan; the lower the score, the higher the interest rate.
It is a point in favor of the applicant if there is a banking relationship already in existence at the bank. Due to the large number of banks that have failed in the last few years, commercial banks are very strict on their lending policies. Of late they have restricted their loans to only those individuals with the higher credit scores. Even with high credit ratings other issues that may impact on an applicant that could result in a rejection are: too many credit cards, late payment fees on auto or home payments, and over drawn checking accounts. Once an applicant is approved, the interest rates will be more favorable than if someone used a line of credit from a credit card or a payday or cash advance avenue for a short term loan.
Credit unions are as critical in their review process as commercial banks for a personal style loan application, but do not require as much paperwork. Credit unions also have a sliding scale of interest rates for great, good and fair credit scores and for adjustable rate loans. However, credit unions, on average, have interest rates that are a couple percentage points lower than commercial banks. Credit unions will also require that any applicant be a member of the facility.
Financial Lending Institutions
Finance loan offices work harder to get applicants approved for personal loans even if someone’s credit score is below the good range. These offices have more flexibility than FDIC organizations. The interest rates are competitive with commercial banks. Financial lending institutes also have more fees added onto the loan amounts that will extend the repayment time and final amount.
Other avenues for individual loans that resemble personal style loans on the surface are programs that apply high, higher, and the highest interest rates imaginable. Some types of loans, both short and long term, have interest rates and fees that exceed an APR of 500%.
For individuals with a real hard line need for a personal monetary loan that must be acquired, it is best to work with the three conventional lending institutions before seeking out other avenues. It might make a difference between being declined and approved for a loan if the applicant cannot individually qualify for a loan but has someone with an excellent credit rating who is willing to co-sign on the loan.
Regardless of the method utilized, once a loan has been approved, it is very important to repay the amount as scheduled or ahead of time. When handled on schedule, this repayment plan can serve to help improve the borrower’s credit score and the lending institution will be welcoming their business again the future.