Before You Apply for a Personal Loan

Times exist when you aren’t just ready to borrow money; you’re motivated to start the process. Before you apply for a personal loan, there are certain steps it’s smart to take. Rushing into a loan without following the steps might work out fine or it can stick you with a loan you don’t really want. Only you can decide if it’s worth it to take the risk.

Determine your needs

When you’re in the market for an auto loan, this step seems obvious. Go beyond the purpose and decide what features you’ll accept when you apply for a personal loan. If you cannot pay an application fee or make payments over a certain amount, draw the proverbial line in the sand before you reach the lender’s office. Doing so will squelch the temptation to take the first offer you receive that doesn’t meet your requirements.

Review your credit report

Checking your credit file at least once every 12 months is a good strategy to stay on top of the information found within. If it’s been more than six months since you last pulled your credit, consider ordering a new report before you apply for a personal loan. Multiple inquiries can lower your credit score, so find out if there’s any reason a lender would decline your application before you submit it. Put off your application until you correct any inaccuracies or delinquent accounts you find.

Research your lending options

In some cases, you can find multiple loan products to perform the same function for you. When this happens, make a list of the advantages and disadvantages to using each option. Once you decide, be willing to accept additional facts from lenders, but don’t let a smooth talking salesperson change your mind with hype or financial jargon.

Discuss lenders

Who you apply for a personal loan with is every bit as important as what type of loan you choose. Talk about your options with family and friends. Find out if anyone you know has a loan with a certain company and if they are satisfied with the service. You can also discuss lenders with each other. Sometimes, the information they provide about the competition is relatively free from bias. If a lender tells you to take the deal offered by the competition, chances are high that it’s a good deal.

Shop around

You should not apply for a personal loan with the first company you visit. Even if you later determine the first deal was your best option, you have no way to know that without shopping the competition. Without pulling your credit file, lending companies can give you a wealth of information about their terms and conditions. You can use that information to decide which company wins your business.

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