A small personal loan may be the perfect fit for you if you need a small amount of money to pay for an unexpected expense or to help consolidate credit card debt. In order to get the best personal loan possible, you'll want to do a few simple tasks before applying for the loan you need.
Check Your Credit Report and Credit Score
Before you consider applying for any type of loan, including a personal loan, you should check your credit report to make sure it is accurate. You're entitled to one free copy of your credit report each year from each of the three major credit bureaus at AnnualCreditReport.com. Check each account and make sure your payment histories, balances owed and other information is accurate. If it is not, dispute the item to get it corrected before you apply for a personal loan, if possible, as it may negatively affect your credit score.
Your credit score will play a huge factor in obtaining a personal loan. The better your credit score is, the better interest rate you should be able to obtain on a personal loan. Raising your credit score just 20 to 40 points can make a huge difference on the interest rate you'll pay on your loan. You can check your credit score for free using MyLendingTree. If you aren't happy with your current credit score, you may want to wait and work to improve your score before applying for a small personal loan if it will make a major difference for your finances.
Decide What You Need
Make sure you decide exactly how much you need to borrow before applying for a small personal loan. Whether you need $3,000 to fix the transmission in your car or $5,000 to repair the leaky roof on your home, knowing your needs before applying will allow you to remain focused on your goal and avoid taking out an excessive amount of debt for unnecessary expenses.
Shop for the Best Deal
Once you decide how much money you need to borrow, it's time to start shopping for the best personal loan for your situation. You can check with local banks and credit unions to see what interest rates they offer based on your estimated credit score you obtained. Make sure to ask if there are any special offers you may qualify for to lower the cost of your loan. If visiting local banks and credit unions sounds frustrating, you do have another option. You can compare multiple personal loan offers with just one application on LendingTree.com. Doing so will save you a tremendous amount of time and frustration. It could save you a good bit of money, as well.
In addition to your credit score, most lenders will want to verify your current income to make sure you can pay back the loan. For people that are regular employees, banks will likely want recent pay stubs or a W-2. If you are a contractor or own your own business, you may have to provide bank statements or tax returns so banks can verify your income. Have this information available when you apply for a personal loan to streamline the process.
Compare Loan Options
Once you have found multiple offers you're seriously considering, compare them to find the perfect loan for your situation. Make sure you're only comparing loans with similar loan lengths and similar amounts borrowed. Simply multiply the monthly payment by the number of loan payments required and add any fees associated with the loans to get the total cost of each loan. If all other terms, such as prepayment penalties, are the same, then you'll likely be best off by taking the loan with the lowest overall cost.
The process of getting a small personal loan is now easier than ever thanks to the power of the internet. Simply follow the guidelines above and you'll have the money you need quickly so you can accomplish your goals and move on to the next item on your to do list.