What
is Personal Loan?
A personal loan is a fixed rate, installment
loan taken from a financial institution. You pay it back in a fixed amount over
a specified period (usually 12-48 months). Personal loans are accessible to
everyone, but the better your credit score, the better interest rate you will
get.
Personal loans offer many advantages over
credit cards, including a fixed monthly payment, fixed repayment term, and
quick disbursement of funds directly into a checking account. Because it is a
loan, rather than a revolving loan, once the loan is repaid, you cannot use it
again.
Many people like the fact that they know how
much they will have to pay each month and that the loan will be repaid at the
end of the term, which reduces the risk of going into an even deeper loan hole.
There aren't many restrictions on what you
can use personal loan funds for, but many popular uses are for home repairs,
debt consolidation, wedding costs, and medical bills.
Where
can I get a personal loan of $5,000?
For those with excellent credit and stable
employment, these lenders offer a few personal loans of up to $5,000 with low
fees:
• Discover Personal Loans (660 minimum score).
• Payoff (640 minimum score).
• SoFi (680 minimum score).
• Earnest (680 minimum score).
• Marcus (660 minimum score) by Goldman
Sachs.
• Upstart (580 minimum score).
• Avant (580 minimum score).
• OneMain Financial (no minimum score
required).
Keep in mind, bad or fair credit may be asked
to provide additional information such as multiple checking account statements
or linking a co-signer with good credit. Low credit applicants may get a better
interest rate when applying for a personal loan secured with some type of
collateral (like a car, for example).
Seven steps on how to get a personal loan of $5000
when you need it.
1.
Set Your Requirement
Take some time to think about your reasons
for getting a personal loan and whether it is a necessary financial step.
Personal loans can lead to higher interest rates and borrow money when you
don't need it, threatening your financial health.
Many consumers will have credit card debt
revolving around high interest rates, so a personal loan is a great option for
consolidating that debt into a lower interest rate and fixed payments.
2.
Check Your Credit Score
You can get approval for a personal loan even
if you have bad credit, but the higher your credit score, the better. You can
check your FICO credit score for free with the Experian or Discover Credit
Scorecard.
Personal loans generally require a good
credit score or better, which usually has a FICO score of at least 670.
3.
Check Your Credit Report
If your credit needs some work, look through
your annual credit report for free to determine what areas you need to address.
If you see some incorrect information, you can dispute it with the credit
bureaus to have it corrected or removed from your credit report.
4.
Determine the Best Type of Personal Loan for Your Needs
Usually you have the option of choosing
between an unsecured personal loan and a secured personal loan. The latter
requires that you have collateral, such as cash in a savings account or another
asset, to be approved, and is best suited for those with poor or fair credit.
Also, consider whether you want a fixed or
variable interest rate. Variable rates generally start out low but fluctuate
over the life of the loan in line with market rates. On the other hand, fixed
rates remain the same for the entire repayment period.
5.
Shop Around
Before you choose a lender, shop around and
compare rates and terms from multiple lenders to find the right fit. "I
think it's important for a consumer to do some research on a financial
institution," Victoria said. "Aiming to find a really reliable
resource."
Many lenders allow you to get pre-approved
without affecting your credit, which can help you compare rates and other
features from multiple lenders. Using a loan payment calculator, you can get an
idea of how much it is going to cost you.
The best personal loans offer low interest
rates, flexible repayment terms and fast financing times.
6.
Gather Your Documents
Lenders may require certain documents to
prove your identity and that you are financially capable of repaying the loan
you are taking. Which may include:
• A copy of the photo ID issued by the
government
• Income documents, such as pay stubs, W-2
forms, bank statements and tax returns
• Proof of residence, such as utility bills
or lease agreements
• Checking Account Information
Having this information on hand when you
apply can speed up the application and approval process.
Once you've
selected a loan offer, the easiest way to apply is through the lender's
website, but you can also choose to call or visit one of the lender's physical
branches. After completing the application, you will receive a final rate offer
based on a complete credit check. If you wish to proceed, accept the loan terms
and you will receive funds based on the lender's funding timeline.
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