Personal Loans

What you need to do to get a loan

Personal loans are available to borrowers through banks and private lenders, and are generally restricted to small amounts of money. It's possible to get a small loan without collateral, even if you have less-than-stellar credit history. Before you apply for a loan, though, you need to understand how financial institutions view risk. This will help you better understand your options and find the best possible deal.

The Bank's View of Personal Loans

To get a loan, you'll have to demonstrate to the bank that you do not present an unacceptable degree of risk. This is why it's important to maintain a good credit rating and stay on top of all your debts; the first thing a bank will review when you fill out a loan application is your credit history.

When you apply for a loan, you should also be prepared to provide detailed and up-to-date information about your assets, your current income and employment security, and any secured or unsecured loans you've already taken out. Your loan application will ask you to fill in this information, but you should also be prepared to provide secondary documentation to the loan officer.

The amount of money you're offered, and the interest rate it's offered at, will depend on how much risk you represent to the bank. The better , the higher your income, the more secure your employment, the more assets you have and the less debt you carry, the more money you'll be able to borrow. Low-risk clients also enjoy the bank's best interest rates on loans.

How to Apply for a Loan

Whether you want to borrow from a traditional bank or an online lender, you'll have to fill out a detailed loan application. This application will be subject to an initial review process; if the lender considers you a candidate for a loan, they will follow up and ask for further information. If not, your application will be rejected and you'll have to explore other avenues.

While you'll find offers for bad credit loans through online lenders and some mainstream financial institutions, you should be aware that you'll pay much higher interest. If your credit rating has already suffered, it may not be the best idea to borrow more money.

No matter where you're trying to borrow money from, review the loan information carefully before signing. Some lenders lure borrowers in with teaser rates and terms that only a small percentage of applicants actually qualify for, then tender loan documents with different interest rates and repayment terms. Remember, you can always walk away from a loan and find another one somewhere else. If you qualify for one, you'll qualify for others. Don't sign loan documents out of desperation.

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