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||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|7.73% – 29.99%||$1,000 - $50,000||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|8.00% – 25.00%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|