No matter how well-versed you are in managing your personal finances, it’s all too easy to miss a payment when you’re balancing multiple debts.
Additionally, you may need extra funds for the holiday season or to make much-needed improvements to your home. This is where a personal loan can help ease some of your financial stress.
As someone who recently applied for a personal loan online, doing so has greatly improved my financial situation. If you’re looking for ways to get your hands on some extra money, here’s how to apply for a personal loan online, what kind of research to do ahead of time, and what mistakes to avoid.
What is a personal loan?
There are two major types of loans you can qualify for: secured debt and unsecured debt.
Secured debts, including auto loans and mortgages, are backed by an asset, such as your car or home. If you’re unable to repay a secured debt, your assets will be used as collateral and possibly repossessed to pay back the balance.
Unsecured debts, including credit cards and personal loans, are not backed by any particular asset. If you default on an unsecured debt, your assets are not held as collateral.
One excellent use of a personal loan is to combine several outstanding balances on different credit cards. You can consolidate multiple credit cards into a single personal loan with better terms.
Not only does this help streamline your monthly payments into one transaction, you’re also able to save loads of money on interest fees every month.
How to apply for a personal loan online
If you’re planning on applying for a personal loan online, here are the exact steps you need to take.
1. Check your credit score
Lenders will use your credit score to verify whether or not you’ll be approved for a personal loan and what terms and conditions to offer you. This is why the first step to apply for a personal loan is to check your credit score.
You can do so by using one of these free tools to verify your credit score.
The higher your credit score, the better interest rate and other terms you’ll be able to qualify for when applying for a personal loan. Here’s how credit score numbers stack up:
- Excellent (750-850)
- Good (700-749)
- Average (650-699)
- Poor (600-649)
- Bad (300-599)
Is your credit score lower than you’d like it to be? Here’s how to raise it.
2. Compare personal loan rates and fees
Before settling on a personal loan, take time to compare various financial companies, interest rates, and other fees associated with each loan. If you have a good working relationship with your local bank or credit union, check with them first to compare their rates.
When I was comparing personal loan rates and terms, I went with Discover Personal Loans for several reasons. For one, I’ve been a long-time customer of theirs and knew they would want to get me a good deal. Secondly, they offered me one of the best rates at 8.89% for the full loan amount I needed.
Terms and conditions to keep in mind when you apply for a personal loan online include the following:
- Interest rate
- Monthly payment amount
- Payoff period
- Loan amount
- Upfront fee
- Application or origination fee
- Prepayment penalty
- Availability in your state
The best financial institutions that provide personal loans online usually do not have origination fees or prepayment penalties associated with them. Depending on your credit score, a decent interest rate ranges from 5.95% to 14.49% with loan amounts of $35,000 or less.
3. Gather up necessary info
Once you finalize the company you want to fund your personal loan, it’s time to gather up your personal information. You’ll need your full name, address, Social Security number, proof of income, driver’s license number, and the amount you want to borrow.
Often within just a few minutes of filling out the online application form, you’ll find out how much you’re approved for and at what interest rate. You may have to apply for more than one personal loan with various companies in order to compare the best interest rate, fees, and other terms.
Thankfully, though, this process is pretty simple since it can all be done online within a few short minutes.
4. Follow up with a personal loan rep
Although you can apply for a personal loan online, a representative will usually call you within 24 hours to finalize the details.
If you’re using your personal loan to consolidate other debts, you’ll need to give your loan issuer information regarding the other accounts you’re consolidating. The process will take two to three days for your other outstanding debts to be transferred over to this new personal loan.
Several of the representatives I spoke to were actually very helpful. After deciding to change the payment terms, the customer service rep was nice enough to change the payoff period from three to four years.
If you’re interested in customizing the terms of your personal loan, speaking with an actual person is a very helpful idea — you may be pleasantly surprised at what can be accomplished with a phone call.
5. Pay down high-interest debt faster
There’s no doubt that choosing to take out a personal loan can be a useful strategy for paying off debt or reducing the stress of a financial emergency.
The only drawback? Since a personal loan is unsecured debt and not backed by an asset, it’s completely dependant upon your credit history. If you have great credit, then applying for a personal loan is usually a wise choice.
Use these steps to apply for a personal loan online and start making strides towards your other financial goals.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||Rates (APR)||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|7.39% - 29.99%||$1,000 - $50,000||Visit Upstart|
|5.29% - 14.24%1||$5,000 - $100,000||Visit SoFi|
|8.00% - 25.00%||$5,000 - $35,000||Visit Payoff|
|5.99% - 16.24%2||$5,000 - $50,000||Visit Citizens|
|5.99% - 35.89%||$1,000 - $40,000||Visit LendingClub|
|5.25% - 14.24%||$2,000 - $50,000||Visit Earnest|
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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.