First Time Borrower Personal Loans

How should you compare personal loan options?

Properly comparing personal loan options is not an exact science, but there are some key things to consider when you are reviewing all the options available to you. Things like where you would like to get your personal loan, how do you know if you are getting the best deals, and how do you go through the entire process of obtaining a new loan, all may be some concerns that you have.
First, where would you like to obtain your personal loan is a question that will need to be addressed. Do you prefer going to your personal bank or credit union or would you like to shop the numerous options available on the online lending marketplace?
There are pros and cons to each of these options and there really is no one that would be considered the best. You may like your personal bank and have a good relationship with the staff, and after establishing a long-term banking relationship, you then could have access to special rates, programs, and other considerations. If you belong to a credit union, then you know how being part of a tight-knit banking community can bring its other advantages. Also, credit unions are not for-profit financial institutions that may be able to present other perks that larger for-profit banks cannot offer. If you would like to use the online lending market, then you may find the convenience of the loan process refreshing. Additionally, when you shop the online lending market for a personal loan, you will have access to numerous lenders from across the country who are all competing for your business. That kind of competition could bring its own advantages when it comes to finding the lowest rates and the best personal loan options.
A personal loan is a basic installment loan that is paid off through monthly payments over a specified time period with an interest rate that is essentially the cost the lender charges you for loaning the money to you in the first place. Where you obtain that loan can be the difference between hundreds or thousands of dollars based on the interest rate they offer. Once you have determined which marketplace you would like to use for your loan, then you have to differentiate between the various lenders within that marketplace.
When it comes to the online lending marketplace you may find that some lenders require much higher credit scores than others, and in exchange, they offer lower rates and zero fees. Some lenders are known for helping bad credit borrowers build up their credit and loan to them when others may not, but they charge higher interest rates and fees in exchange. Knowing your credit score is the first step to comparing personal loan options. Some lenders may not even meet their minimum credit score requirements so you can most likely start to narrow down lenders you can work with and lenders you cannot.
Once you know your credit score and where you stand, you will be able to begin to compare personal loan options by looking at things like interest rates, special programs like unemployment protections, and what kinds of amounts and loan repayment periods the lenders may offer. Are you looking for a low-interest loan for $50,000 or more with a longer term? Or a simple small personal of $2,000 to cover some emergency car repair? This too should help you narrow down your personal loan options. Whether you are looking for a personal loan from your bank, a credit union, or the online lending marketplace, knowing what your needs are, where you rank on the creditworthiness spectrum, and what you look for in a lender is the first step to comparing personal loan rate offers. After that, you can compare rates and perks from the lenders that can make offers within the scope of your financial needs.

How do you choose the right lender for your first personal loan?

If you are obtaining your first personal loan, you may or may not have that much previous credit history. Because of this, your options may be more limited. You may even have to offer an asset as collateral to secure the loan. Or you may be limited to options with higher interest rates and fees. Be wary of predatory lending practices if you can help it. You should be able to obtain your first personal loan with at least a fair credit score without needing to visit a Payday loan center or using your vehicle as collateral at a title loan center.
Before you start the process of choosing the lender for your first personal loan you should check your credit score. You can obtain free copies of your credit score from each of the three credit bureaus once every 12-months. Or, you can use a free online credit monitoring service. Some credit card companies already offer free credit monitoring services if you are a customer. Based on your credit score, you may have more or fewer options. Good or excellent credit borrowers tend to have more options than people with bad credit or no credit.
That being said, if you use the online lending market to shop for your first personal loan, you can always prequalify to see which lenders you may be able to obtain a personal loan from. When you prequalify, basically a soft-pull credit check is conducted. A soft-pull credit check has no impact on your credit report. By entering some basic information about your identity and income, you can instantly have access to dozens of lenders who are willing to work with you to help you obtain the personal loan you are looking for. It may be overwhelming if you see a number of online lenders who think that your creditworthiness is worth working for.
So, how do you know which lender is right for you? You may want to read some online reviews of specific lenders that you may be interested in. Customers tend to be honest about their experiences, especially if it is online and semi-anonymous. Look for red flags like untransparent interest rates, terrible customer service, or having a reputation of taking advantage of people who may not be borrowing more than they can afford.
After you have identified lenders that seem trustworthy and someone you may want to work with, then you can begin to review the loan amounts they offer and the interest rates they charge. Do they charge an origination fee? Do they have any special programs that fit your needs? For example, some lenders may offer certain hardship protections if you should lose your job. Do they have a rate discount for enrolling in automatic payments? Do they offer same or next-day approval and funding? Once you know which lenders to look at, you can do your research to see which lender fits your needs.

What should you know about personal loans:

If you are looking for your first personal loan, there are maybe a few basics that you should educate yourself on before. Here is a quick breakdown of a few of those basics.

Amount: The amount of money you are looking to borrow from the lender to be repaid in monthly installments over a period of time.

Repayment: Also known as the term. This is the amount of time you will have to make monthly payments. Personal loans come with repayment terms of up to 12-years depending on the lender.

Interest Rates: The amount you will need to pay the lender over a period of time to borrow the money. Interest rates are expressed in a percentage of the total amount of the loan.

Credit Score: How you look in the eyes of lenders based on your past credit history. Based on numerous factors like payment history, credit usage, and others. Expressed on a scale of 300-850.

Unsecured Vs Secured: An unsecured loan is based only on your credit score and is offered with no collateral required. A secured loan uses an asset to secure the loan that is forfeited if you should default on the loan.

Joint/Co-Signed: A joint or co-signed loan is another type of secured loan that is a partnership between two people. A joint loan is two people who are obtaining a loan and both people have access to the funds and each is responsible for making payments. A co-signed loan is where a primary borrower is responsible for the payments on their own and the sole owner of the funds, but if they are unable to pay then the co-signer can be held responsible for the loan.

What should you know about personal loan applications:

Check Your Credit Score: Knowing your credit score is important to know which lenders you may qualify for and whether or not you should try to improve your credit before applying for a personal loan.
Gather Credit History: The lender will gather information about your credit history to determine what kinds of rates and fees you may have to pay if you are approved for a loan. Also, the lender will use this information to determine if you qualify for the amount you are seeking.
Determine Income: Income is also used to determine if you qualify for the amount you are seeking.
Calculate Monthly Debt Payments: Monthly payment amounts are determined by a combination of the loan amount, the APR, and the loan term.
Calculate Your Debt-To-Income Ratio: The debt-to-income ratio is the percentage of current debt payments versus income. Essentially, how much money comes in versus how much is going out each month. It is used to determine if you are likely to be able to afford the monthly payments of the loan.
Provide Contact Information: Basic information for the lender to verify your identity and communicate with you.

Should you improve your credit score before applying for your first personal loan?

Whether it is your first personal loan or it is your fourth, it never hurts to improve your credit score before applying for a personal loan. Some things you can do to improve your credit score before applying for a loan is paying off credit card debts, taking care of delinquent debts, and making sure you do not apply for any other lines of credit before you apply for the personal loan. Also, always make all payments on time whether you are trying to improve your credit score or not. Any late payments can hurt your credit dramatically.
By improving your credit score even by 20 or 30 points, you could qualify for larger loans and lower interest rates.

What do you do if you're a self-employed applicant?

If you are self-employed, you can get a personal loan pretty easily. By using documents like your tax returns, Schedule C, 1099-misc, Schedule SE, profit and loss statements, and even your present bank statements, you can complete the income verification portion of a personal loan application. After that, the rest of the application process is pretty similar to someone who is not self-employed. If you have excellent credit and a solid financial position, the lender may not ask for supporting documentation to prove income or self-employment.

Can you pre-qualify for a first-time personal loan?

Yes, as a person applying for their first personal loan, it may be in your best interest to pre-qualify to see which lenders are willing to work with you. Prequalifying is the easiest way to have your credit checked to see if you could potentially qualify for a personal loan in the amount you are requesting. Most lenders offer an online prequalification process that should be fast and painless. If you are looking to compare offers from several lenders, you can use an online platform such as Acorn Finance. Rather than applying for several lenders separately, you can complete one form. Within 60 seconds or less you can receive multiple personalized loan offers with no impact on your credit score.
If you are unable to qualify on your own, don't lose hope. You may need to establish more credit first. One way to do this is by getting a secured credit card. Another option may be to apply with a cosigner. If you choose to apply with a cosigner you should find a relative or friend with a good credit history that trusts you. Co-applicants and primary applicants are equally responsible for the loan.

How do you apply for a first personal loan?

Anyone interested in applying for their first personal loan can follow some basic steps to obtain their loan.
Check your credit report: Always check your credit report for free before applying for a personal loan. It can let you know which lenders you may or may not qualify for and if you see anything that can help improve your score, you may want to take action.
Prequalify: Prequalifying can give you access to dozens of online lenders that allow you to shop for lenders based on what kind of loans you may be looking for based on loan amounts, terms, and interest rates. The pre-qualification process allows for a soft-pull credit check to see if you are eligible for the loan amount requested. A soft-pull credit check has no impact on your credit report, however, a hard check will be conducted during the application process with the lender.
Shop for lenders: After pre qualifying, you may start to receive loan offers from lenders that can review to determine which lender is right for you.
Accept a loan offer: Find an offer that works for you and accept it.
Fill out the loan application: Complete the full loan application directly with the lender by providing all the necessary documents and information.
Wait for approval: The lender can review your application to give final approval.
Accept funds: Once approved, wait for the funds to be deposited into your bank account. Deposit times can range from the same or next day to a few days.