Do you know how to get a loan? Like any other important financing decision, you need to know the right steps to take and how to approach each. It’s pertinent to understand that some loans are unsecured, which means you don’t need a collateral such as your car or house to get one. Regardless of the type, do you even know how to get started? This explores the entire steps of securing a loan that’s right for you.
How to Get a Loan
We’ve summarized the step by step process of getting a loan into 7 steps:
- Step 1: Decide the loan amount you need
- Step 2: Find a loan that’s right for you
- Step 3: Look at what different lenders offer
- Step 4: Check the loan requirements and APR
- Step 5: Compare lenders’ offers
- Step 6: Gather the required documents
- Step 7: Submit your loan application
As one of the first steps, compare different lenders to ensure you are signing the best deal possible:
Step 1: Decide the Loan Amount you Need
To find a loan that’s best suited to your needs, you must decide the exact loan amount you need, as well as the present condition of your finances. Assuming your end-goal is to purchase a car, you can secure one if you have good credit ratings, which in turn, would reduce your annual percentage rate (APR). But if your credit score is weak, then you’ll need a co-signer to qualify. The various categories of credit scores include:
- 720 and above: Excellent credit
- 690 to 719: Good credit
- 630 to 689: Fair/average credit
- 300 to 629: Bad/weak credit
The next thing is to consider the actual amount you need to borrow, the duration of repayment that suits you, and the payment method that is best for you. Finally, you’ll need to consider additional features you require from the loan. For example, would you want to pay off the loan earlier?
Step 2: Find a Loan that’s Right for You
So what type of loan would you need? The types of loans available in the US include unsecured loans, secured loans, fixed rate loans, and variable rate loans. Also, there are the payday loans, installment loans, and auto title loans available if your credit score is bad. Hence, you’ll need to study these loan types before settling on the one that suits your needs.
Step 3: Look at What Different Lenders Offer
Once you decide the amount and type of loan you need, the next step is to shop around, identify what different lenders offer, and pick what works best for you. Lenders such as banks will most likely provide a range of credit card products and personal loans, but they would probably not cater to people with low credit scores. However, lenders such as credit unions, or your local banks may have installment and payday loans for people having lower credit scores.
Step 4: Check the loan requirements and APR
One of the most important steps of how to get a loan demands that you check the basic eligibility requirements listed by lenders. Usually, you must meet a lender’s criteria before applying to get one. Whichever lender you choose to work with, make sure to peruse their requirements and APR range before applying.
Some lenders list APR ranges that accommodate personal loans; however, most lenders offer payday and bad credit ones to all borrowers. You can even get rate estimates that don’t affect your credit score from peer-to-peer lenders. Moreover, as highlighted in step one, it is pertinent you know your credit score and some idea of the APR range applicable to you.
Step 5: Compare Lenders’ Offers
The best way of how to find a loan after deciding your requirements and checking the range applicable to you is to find competitive offers from lenders. Things you’ll want to consider are: what fee is the lender charging? How does it compare to other loans? If you take the time to delve into these, you’ll get insights into the features different lenders offer, as well as identify conditions that are favorable to you.
Step 6: Gather the Required Documents
The information and documents needed to apply for a loan vary according to the type and the lender. However, some vital documents include those to confirm your address, prove your identity, verify your financial status such as your income, and your employment details. For a secured one, lenders would require additional documentation to verify your collateral.
Step 7: Submit your Loan Application
Submitting your application is the final step of how to get a loan. At this point, you have decided what loan you need and settled for a lender that offers what’s best for you. Most lenders nowadays provide a convenient online application process, but you can also apply over the phone or in-branch. Finally, the turnaround time before your application is approved and your funds delivered differ depending on the lender, but would likely fluctuate between some hours and a few weeks.