Where Can I Get a Personal Loan?

By information.com — Published October 10, 2017

Where Can I Get a Personal Loan?

Where can I Get a Personal Loan?

Are you in need of a personal loan? Getting loans from lenders can be a time-consuming task. There are multiple forms that you would need to fill and various procedures and checks that you would need to undergo, in order to become eligible for a personal loan.

If you’ve been wondering where to get a personal loan, the answer is the bank. While there may be multiple other unorganized financiers who are willing to provide you the finances you need, it is recommended to approach a bank for loans of all types. Taking a loan from the bank provides security for applicants, reducing the risk attached to loans.

Another way to get personal loans is through online financial websites, who either work with or are offshoots of banks and other financial agencies. But, before we understand the loan application process, let’s take a look at the types of personal loans that you can apply for.

Types of personal loans

Lenders provide loans of two types. They are:

  • Secured loans

These loans are secured against a property that is owned by the applicant. When applying for a secured loan, applicants must mortgage a property or item that belongs to them, such as their house, car, electronic goods and so on. In the event of non-repayment, lenders are eligible to seize and auction the mortgaged items to recover the money. While the risk for the applicant is higher here, the interest you need to pay is lower.

  • Unsecured loans

Here, lenders do not have any recourse available in event of non-repayment, as the applicant does not need to mortgage any property while applying for the loan. However, the interest that needs to be paid is significantly higher here.

Loan application process

Are you unsure how to get a personal loan from a bank? Banks have a seven-step process when it comes to whetting loan applicants and providing personal loans. Understanding how this process works will help you equip yourself with the necessary documentation and be more knowledgeable about what is expected out of you post-sanction of the loan.

  • Submission of application

Each bank will have a particular application form that they provide applicants who seek personal loans. The form will have questions regarding the applicant’s personal details, employment details, the reason for loan application and so on. Be sure to fill all the details to the best of your knowledge, as failure to provide correct information can be construed as a criminal offense.

  • Personal Interview

Banks conduct a face-to-face personal interview with the applicants, to better understand the reason for the loan application. Banks take on a lot of risks while distributing loans and personal interviews serve as a way to sieve out undeserving candidates. You can use the interview to learn more about the terms and conditions of the loan you are applying for.

It’s important to remember that personal loans, although useful, come with their own share of pitfalls. Here are some facts about personal loans that you need to keep in mind while applying for them:

  • Personal loans are available only for a fixed term and the time period is decided during the application process.
  • You will need to pay a fixed interest on the loan for the entire duration of the lending.
  • Pre-payment and pre-closure penalties may be levied if you wish to clear the loan before the lapse of the lending period.
  • Some personal loans are sold with insurance, leading to high premiums getting attached to the loans.
  • Your personal loan may be subjected to pre-compounded interest making interest rates higher.

Be sure to ask your bank officer regarding the above points, during the personal interview. 

  • Checking of the credit score

Your personal credit rating is an indicator of how well you handle your money. Banks use this score to understand whether their money will be safe in your hands or not. You will be asked to provide bank statements and other credit information during this stage. If you are a self-employed individual, remember to submit your books of accounts to the bank officer.

Credit scores are divided into categories, such as:

  • 300-629: Bad credit
  • 630-689: Average credit
  • 690-719: Good credit
  • 720 and higher: Excellent credit

If you fall above 690 in your credit score, you will have no problem getting the loan. However, if your rating is lesser than 690, you may be expected to furnish additional credit documents to your bank officer. Other reasons for failing to get the loan could be a shoddy work history, too many credit obligations, limited earning capability or a history with the authorities.

  • Pre-qualification for the personal loan

Reaching this stage indicates that the banks consider you a good candidate for the loan. At this stage, the bank will ask for additional information such as your Social Security Number, details about previous debt obligations, salary break-up, other sources of income and so on.

  • Document filing

Once you are pre-qualified to get the loan, you will be asked to submit important documents to secure the loan. You will be expected to file your salary slips, income tax forms, bank statements, passbook details, documents for mortgaged items, proof of place of residence, proof of citizenship and photo identity proof. You may be asked to submit other documents as well, depending on the details of your personal loan.

  • Agreement signing

Once all the documents have been verified and filed, a formal document will be drafted and both you and your bank officer need to sign this. A copy, containing the terms and conditions will be given to you.

Apply for your personal loan online

A visit to the bank is just one way to secure the loan. If however, you find that you are unable to visit the branch in person, you can choose to apply for your personal loans online. There are many online financing websites and portals that provide personal loans to applicants. Websites such as NerdWallet and Cashwell Online allow users to apply for loans on their portals. Many banks too have websites, where customers can apply for various types of loans. While the method of application changes, the procedure remains the same.

Things to do while applying for a personal loan

Experts recommend applicants to follow a few steps, during their loan application process. These are:

  • Keep your options open and check out various avenues for personal loans, before finalizing on one.
  • Check the interest rate charged by different banks and websites and choose one that suits your requirements.
  • Certain loans come along with other benefits such as insurance. Explore your options and select the one that works for you.
  • Read the fine print at the bottom of your loan agreement or have your lawyer look it over, before signing it.

When should you take a personal loan?

While there is no hard-and-fast rule about when to take a personal loan, here are a few situations where these loans might come in handy:

  • Higher education
  • Medical bills
  • High debts, including consolidated loans, credit card debts and more
  • Home remodeling
  • Foreign travel
  • Wedding expenses
  • Purchase of capital goods

Personal loans are extremely beneficial when you are in dire need of cash. Compared to other loans they are easy to get and easy to repay. Understanding how to apply for and secure these loans will make the entire process hassle-free.

 

Related Articles