How to Get a Loan: A Brief Guide to Taking out a Loan
Need to take out a personal loan? Take a look at this brief guide for tips on taking out a loan and how to get approved.
Debt is as helpful as it is harmful. The trick to making it work for you is how you use it.
There are more than 38 million personal loan accounts open today.
People take out loans for projects ranging from home improvement to consolidating credit card debt. Here’s a brief guide about loans and how to make the lending process work for you.
Taking Out a Loan for Emergencies
One of the most common reasons people take out loans is to cover emergency expenses. These loans are often sought out through the fastest possible methods like a payday lender or through a short term loan with your bank.
Your options to secure an emergency loan within a few days depends on your credit score. The three major credit bureaus provide lenders with your FICO score to give them an idea of whether or not you’ll repay your debt.
If your credit score is low, lenders view you as a high risk and will either charge a higher than average interest rate or deny your loan application. The higher your credit score the easiest it will be to get instant access to cash for low fees.
Having bad credit means resorting to payday loans or credit cards with high fees in order to cover emergency expenses. These loan types are tricky because the fees can make payments unaffordable.
If you’re not careful, the debt snowballs over time creating more anxiety than you started with. Check out this helpful post on loan alternatives if you have less than average credit.
Taking Out A Loan for Debt
Another reason to take out a personal loan is to consolidate your debt. Credit cards offer introductory interest rates and promotions that expire in 1 to 2 years. After this introductory period, many people opt to transfer their debts to new cards or consolidate their debts in a low-interest loan.
The benefit is making only one payment instead of several different payments throughout the month. Too many payment dates are a disadvantage when managing debt because it increases the chances you’ll miss a payment and damage your credit.
A single consolidated debt loan provides an easy way to track how quickly your debt is getting repaid. Debt consolidation loans have fixed interest rates which means you get one interest rate Credit card for the entire life of the loan.
Credit cards have variable interest rates which means the interest rate can change at any time. This means payment amounts might not be the same from month to month which is a major disadvantage if you live on a fixed monthly budget.
What Do I Need to Get a Loan?
Getting a loan is easy with the growing number of online loan companies. Prepare for the loan application process by gathering your personal information including your credit report.
As long as you have a source of income and a bank account where loan funds can be deposited, you can often get a personal loan funded in just a few days’ time. For more information and tips, check the blog for updates.
