Whether you're moving cross country, financing an adoption, or borrowing money to consolidate debt, a personal loan can support you in covering your expenses.
A majority of personal loans are unsecured, so collateral like a house or car is not needed. Loan amounts generally range between $1,000 and $100,000 and are paid back in fixed installments, usually between two and seven years. Based on your credit, rates and terms will differ.
1. Get your credit score checked
A solid credit score offers you a better opportunity of being eligible for a personal loan and securing a lower interest rate. Evaluate your creditworthiness by assessing your free credit score. Typically, scores are typically classified into the following categories:
>720 - Excellent credit
690 to 719 - Good credit
630 to 689 - Fair or average credit
300 to 629 - Bad credit
2. Determine how much to borrow
Decide the exact loan amount you need, and refrain from borrowing more than that. A bigger loan amount has higher interest and monthly payments that can be detrimental to your budget.
3. Compare approximate rates
Figuring out your credit score will help you understand the yearly percentage rate and payment amounts your personal loan may reflect.
4. Get pre-qualified for a loan
When you pre-qualify for a loan, you get a peek into the offers you may receive. Several online lenders conduct a soft credit check at the time of pre-qualification that doesn't hurt your credit score. During the pre-qualification process, you are usually asked about the loan amount, purpose, your income, address, email, phone number, monthly debt obligations (rent, student loans, etc.), date of birth, citizenship status, employer name and location, and college name and degree.
5. Go shopping for personal loans
Unsecured loans are typically offered by online lenders, banks, and credit unions. Make a comparison of your pre-qualified offers with monthly payments, loan amounts, and interest rates from a selection of lenders to get a loan offer that fits your needs.
Borrowers with bad credit may have a shot with credit unions that provide lower interest rates and more flexible terms. They're also your best bet for a small loan that doesn't exceed $2,500.
6. Explore other credit options
Before settling for a personal loan, check whether you are eligible for a 0% credit card. If your credit rating falls under the good or excellent category, you may be eligible for a zero-interest credit card on purchases for a year or more.
