An estimated 40 million Americans take out personal loans each year with another 12 million turning to payday loans based on reports from the financial sector. Over the last several years, lenders have branched out to offer a number of options for those in need of extra cash. Many have also taken measures to cater to a broader range of income brackets and credit standings.
Though almost everyone is eligible for some type of loan these days, not all of them are good fits for all circumstances. Doing research through a company like Loan Review HQ and being prepared in advance will go a long way toward ensuring you have a positive borrowing experience. Keep the following tips in mind if you’re looking for a loan.
1) Know Your Options
Numerous types of loans are available, but for those who need extra money quickly, three main options usually come into play: personal, payday and title loans. Title loans aren’t based on credit history. All you need to be eligible for this alternative is proof of vehicle ownership, registration, insurance coverage, an ID matching the name on the title and proof of employment and income.
How much money a title loan will provide depends on the value of the vehicle in question. Interest rates tend to be high, and if you can’t repay the loan, you lose the vehicle. In many cases, the cost outweighs the benefits in this scenario.
Payday loans also have few eligibility requirements other than a valid ID and bank account, proof of residence and pay stubs. They tend to come with lofty interest rates and must be paid back fairly quickly. In most cases, the balance is due on your next payday, but some lenders offer slightly lengthier terms. They’re not available in all states, though, so this isn’t an option for everyone.
Personal loans generally have lower interest rates than payday and title loans as well as longer terms. Payments are broken down into smaller amounts rather than having the entire balance due at one time. They have more stringent qualification requirements, so those with less-than-satisfactory borrowing histories may not be eligible.
2) Understand How Much the Loan Will Cost
Keep in mind, a loan isn’t just the amount of money being borrowed. When the time comes to repay, interest rates and certain fees will be factored into the equation as well. Paying off a $1,000 loan could easily amount to $1,500 or more in the long run. Read the fine print and use a loan calculator to help figure out exactly how much you’ll be repaying and whether you can afford it.
3) Know Your Credit Score
Not all loans are based on credit scores and borrowing history, but these aspects could affect how much you can borrow and interest rates. They may also limit the types of loans at your disposal. Look up your credit score in advance of applying for loans to save time and hassle.
4) Have the Right Documents on Hand
When applying for a loan, not having the right documents on hand could delay the approval process. Required documents vary by state and loan type, but you’re bound to need certain basics.
- Driver’s License and Social Security Number
- Bank Account and Routing Number
- Bank Statements
- Pay Stubs for the Last Couple Months or Most Recent W-2s. (If you haven’t been with your current employer for very long, proof of prior employment may also be needed.)
- Proof of Residency
Other items may come into play as well. Whether applying in person, over the phone or online, find out what types of documents are needed beforehand and have them ready.
5) Be Diligent with Payments
Making late payments could hurt your credit score and lead to costly fees. If having payments withdrawn directly from your bank account, failure to have adequate funds when the time comes will bring about overdraft fees, insufficient funds charges and other extra expenses.
If you anticipate having trouble making a payment, call the lender ahead of time. Chances are they’ll be willing to work with you. Late fees may still apply, but making arrangements in advance could thwart some of the other add-on charges.
All Things Considered
If you need extra cash for unexpected expenses or to help make ends meet for the month, you’re not alone. Research shows the majority of Americans will need a loan at some point in their lives. Following these tips will help make the borrowing and repayment processes go more smoothly and could save a great deal of time and money along the way.
CANDY TAI is a wife to David and mom of 5 with a degree in Communications. She's a native Texan (Hook 'Em Horns!) who's been making her home in the Kansas City metro area for nearly 15 years. She loves being able to shuffle her kids from their various sports activities, piano lessons, and school activities. She enjoys fashion, beauty, reality TV, and moviegoing.