Personal Loan Requirements
If you are considering applying for a personal loan, you may be wondering what they entail. If you are needing money for any purpose, a personal loan online can be a great option to consider. Before you go and obtain a personal loan estimate, consider some of the important things about them you should understand before signing on the dotted line. When it comes to an online loan, you may be curious about what the difference between personal loans and installment loans are.
Differences Between An Online Personal Loan And Installment Loan
In a nutshell, an installment loan is a type of personal loan that can be paid back over a pre-determined amount of time. The monthly payments are typically the same each month. Common types of installment loans are mortgages, auto loans and student loans. Installment personal loans differ from short-term loans such as cash advances and payday loans which need to be paid back in full.
The typical loan term for a fast cash loan is between two weeks and a month. Personal loans and installment loans generally have loan terms between two and five years in length. When it comes to personal loans, there are secured and unsecured options.
Personal Loan Requirements- How To Qualify
Before you apply for an unsecured personal loan online, you need to show the lender you are not a risky borrower. A lender of an online personal loan will use a variety of factors to assess your risk. They want to determine the likelihood you will pay your loan back. Some factors they use include debt-to-income ratios, credit scores and your employment status. If you are thinking of filling out an application, below are some ways to make sure your application has a good chance of being approved.
1. Check Your Credit
For almost all loan types, a borrower's credit score will have a significant impact on whether or not a lender will approve the application. Lenders do not generally disclose the exact scores they are looking for when determining approval. However, most will prefer good or excellent credit scores for their best rates. Before applying for any loan, check your credit to ensure there are no discrepancies to fix beforehand. You may also choose to order copies of your credit report from the top three credit bureaus. You can obtain a free copy from each bureau once a year.
2. Pay Bills On Time
If you have a credit score that is low, one of the best ways to improve it is by paying all of your bills on time. This will increase your score and improve your chance of being approved for a personal loan with a decent interest rate.
3. Pay Your Debts Down
Another major determining factor lenders use is your debt-to-income ratio. If you have a high ratio and are not in a big hurry to apply for a personal loan, take some time to pay down your debts. This can help raise your credit score and get you better interest rates on your loans.
4. Prove Stable Income
Lenders look at a potential borrower's credit score to get an idea of their financial history. Lenders also like to look at other factors such as employment history and income when making their decision. They want proof that a borrower will be able to comfortably make all of their payments when due. Unstable employment in recent years could hurt your chance of getting approved.
5. Find A Cosigner
If you have less-than-stellar credit and you don't have a solid employment history, you may be able to obtain a personal loan if you find someone to cosign with you. The cosigner will need to have good proof of income and a great credit score. Keep in mind that a cosigner will be assuming responsibility for the loan if you stop paying. Both you and your chosen cosigner will need to be comfortable taking on the debt together.
6. Choose The Right Lender
Not all lenders are the same. While most lenders have similar requirements that need to be met for a personal loan, each company will have its own underwriting eligibility requirements. If you have a relationship in good standing with a credit union or bank, you may have a better chance of getting a personal loan approved with them.