Understanding the Process of Personal Loan Applications         

Whether you need a new car, update your home, or plan your child’s education, you wait and save. It is because one rarely has an ample amount saved to achieve every life goal hassle-free. However, you do not have to dig into your personal piggy bank or save endlessly to accomplish every goal. Personal loans can help you win over dreams. 

It is a loan that allows you to borrow a specific amount up to £35000 and pay it in equal monthly instalments for up to 7 years. If you spread payments for up to longer repayment tenure, your monthly payments get low, but you pay more interest over time and vice versa. The interest rates stay the same throughout the loan tenure.

You can use the personal loan for any purchase or emergencies- furniture purchase, paying for hospital costs/surgeries, assisting a child’s schooling needs, buying a car, etc.

It is a basic definition of personal loans. The blog states the personal loan application process. If applying for the first time, you may benefit from it.

How does the personal loan application process take place?

Personal loans are usually unsecured loans which do not require you to provide collateral. It is the reason the loans have competitive terms and interest rates. Therefore, the lenders conduct a detailed screening of the profile before providing one.  If you want a loan for whatever purpose as mentioned above, you may experience the following things. Read ahead to know the step-wise personal loan application process:

1)     Identify the purpose

As mentioned above, you can use a personal loan for any purpose. Yes, you can use a particular amount for different purposes as well. For example, you can tap a £35000 loan to pay your credit card debt, repair your home’s backsplash, pay your books and stationery fee, re-fuel your car or repair it, etc. Alternatively, you can use £35000 for a single purpose like- home renovation. Thus, identifying the purpose and having clarity is the first thing.

Knowing the purpose will help you identify the amount you need to borrow. Avoid borrowing too much or too little for your needs. The amount you borrow impacts the overall loan process and proceedings.

2)     Explore the best personal loans

Once you know the purpose you want to borrow money for, explore the best personal loan quotes. Check the aspects like APR, interest rates, terms, and fees before applying. You can also pre-qualify for the loan to know the possibilities of getting the loan.

 It reveals a tentative but near-true reflection of your chances of getting a loan. By entering the amount you need, the income, and the loan tenure, you may get a clear overview of the costs involved. Compare the personal loans by using a free calculator.  It helps you know whether the loan is right for you without impacting your credit score.

3)     Identify a personal loan cost

Usually, the loan costs depend on the loan amount, loan interest rates and loan terms.  It also depends on your credibility to manage finances. If your existing credit score is low, you may not get a cheap personal loan. In that case, the lender may charge you extra. Alternatively, individuals with low and stable credit history can fetch low-interest loans.  Check for additional and hidden costs that may increase the overall costs of the loan.

4)     Improve your credit history

Credit history and score account for essential parameters like income. A lender analyses your credit score to identify whether you can afford the loan comfortably. Having a poor credit history casts a negative impression. The loans may seem costly then. However, you may get personal loans with a poor credit score at affordable rates by getting a guarantor, co-signing a loan or paying some debts off the credit profile. Still, having a sound credit history presents more options before you. It helps you choose from the least costly loans available.

Thus, always work on your credit history before applying for a personal loan. Credit score and income matter the most in unsecured personal loans. You can improve your credit history by:

  • Removing your name from joint accounts
  • Reducing your reliance on credit cards
  • Reducing expenses and improving your credit utilisation ratio
  • Increasing income
  • Reporting paid debts to credit agencies and bureau

5)     Apply with the affordable shortlisted lender

After preparing your profile for personal loans, apply with the best lender that aligns with your credit profile. The application process begins with filling out a quick form mentioning personal details. It includes- name, email address, contact number, and loan amount. Provide these details while applying for the loan. Additionally, check spelling, credentials and the details you provide before clicking the apply button.

6)     Get the lender’s reply and provide documents

Soon after your loan application, you will receive a response from your lender. He may present you with an agreement according to the basic details you provide. Identify the agreement and read through the contents.

Analyse aspects like- interest rates, APR, missed payment fees, loan fees, missed payment fees, loan closure fees, etc. Additionally, read the terms regarding the loan payments, payments in case of financial issues, and other aspects. Reading the document will help you understand whether the loan is right or fits your needs.

Additionally, identify the document requirements that the lender may ask simultaneously. Provide these accordingly. Most lenders require documents like- Personal ID, income proof, bank statements, address proof, etc. Check whether you need xerox.

  • Provide your approval on the loan agreement

If you find the loan terms feasible and manageable, provide your approval. You need to provide the document with your signature. Scan and send the copy or mail the document with your signature.

Identify the repayment structure. Choosing a long-term repayment may not be suitable for short-term loans. Thus, while seeking personal loans for bad credit online for the short term, choose a small repayment term. The repayment amount may seem high, but you can repay the loan early.  Additionally, analyse your income and savings before choosing the repayment tenure. It will help you ensure a comfortable one.

Lastly, make timely repayments on the loan up to the repayment term. Contact your provider if you struggle at any point. He may help you get a suitable solution.

Bottom line

This is how you can get a personal loan for your needs.  A personal loan is an ideal way to finance your short and medium-term requirements without worries. It is an unsecured way to finance your needs without staking collateral.  Identify the loan terms, costs, APR, interest rates, etc., before applying. It will help you get the right and affordable personal loan.

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