According to data from the U.S. Chamber of Commerce, personal loan balances experienced a twofold increase from 2015 to 2019, reaching a substantial $143 billion in debt by 2019. This surge in popularity is not surprising, given the versatility and usefulness of personal loans as financial tools. In this article, we will explore personal loans in greater detail and provide guidance on the application process.
What is a Personal Loan?
A personal loan is a type of loan that can be utilized for various personal reasons, allowing borrowers some discretion within reasonable constraints set by the lender. These loans are typically installment-based, meaning the borrower receives a specific sum of money at an agreed-upon interest rate and repayment terms. Subsequently, the borrower makes monthly payments, similar to an auto loan, until the debt is fully settled.
Common Uses for Personal Loans
Before applying for a personal loan, it is crucial to have a clear purpose in mind. Some lenders may inquire about the reason for the loan application, and certain lenders may have specific restrictions, such as not approving loans for debt consolidation. However, in general, personal loans can be used for a wide range of purposes, including:
- Making major or minor purchases, such as buying a new refrigerator or computer.
- Covering unexpected expenses, like emergency air conditioning or car repairs.
- Paying off high-interest debts, such as credit cards, to simplify and streamline finances.
- Building or improving credit by making timely loan repayments.
Getting a Personal Loan from a Bank or Lender
The process of obtaining a personal loan involves completing a loan application. Each lender has its own set of qualification criteria. Some primarily rely on credit scores and history, while others consider various factors beyond creditworthiness. Some lenders might not even perform a credit check.
Here are some essential steps to follow when applying for a personal loan:
- Assess your credit report: Before applying, it is advisable to review your credit report to understand your financial standing. You can obtain a free copy of your credit report from each major credit bureau through AnnualCreditReport.com. Addressing any issues or errors beforehand can improve your chances of loan approval.
- Research loan options: Applying for multiple loans in quick succession can negatively impact your credit score due to multiple hard inquiries. Therefore, take the time to research and identify suitable loan options that align with your needs and qualifications.
- Budget alignment: Ensure that the loan’s monthly payments fit comfortably within your budget. This is vital whether you have excellent credit or are applying with bad credit. Consistent, on-time payments are essential to protect and improve your credit score.
What Documents are Needed for the Loan Application?
The specific requirements for a loan application may vary among lenders. However, common documents typically requested include:
- Photo ID: A valid photo ID, such as a driver’s license, is usually required for identity verification.
- Proof of income: Lenders want assurance that you have sufficient income to repay the loan. Common documents to verify income include W2s, paycheck stubs, or bank statements for those with nontraditional sources of income.
- Active bank account: A checking or savings account is often necessary for online lenders to transfer the loan funds to you. Some lenders, including Wise Loan, can process funds quickly upon approval.
- Personal information: Be prepared to provide personal details such as name, address, contact information, and in some cases, your Social Security number.
How to Apply for a Loan with No Credit
If you have little or no credit history, or if your credit history is limited due to youth, don’t worry – you can still apply for a personal loan. Some lenders, like Wise Loan, cater specifically to individuals with limited credit history and aim to help them build their credit. To increase your chances of approval, make sure to:
- Choose lenders that don’t require excellent credit scores for approval.
- Verify that the lender reports to credit bureaus, as timely repayments will positively impact your credit history.
- Gather sufficient information to demonstrate your income and repayment capability.
- Start with a reasonable loan amount, as smaller loans are often more accessible to those with no or poor credit.
The application process for a personal loan with Wise Loan is quick and straightforward, taking only about 5 minutes to complete online. If you’re ready to apply, visit the Wise Loan website and complete the application today.
The recommendations contained in this article are designed for informational purposes only. Essential Lending DBA Wise Loan does not guarantee the accuracy of the information provided in this article; is not responsible for any errors, omissions, or misrepresentations; and is not responsible for the consequences of any decisions or actions taken as a result of the information provided above.
More information on Installment Loans and how they work in your state: