There’s no doubt about it; at some point in your life, you’re going to run into a financial emergency. This means that you are going to require cash, and you’re going to need it fast. In this world of instant gratification, many companies have made it relatively easy to obtain short term personal loans online or in-person with incredible speed.
These are often a much faster route to take than having to go to a bank and ask for a loan. The process alone can take weeks. However, before you sign on the dotted line, here are seven things you should know before applying for a short term personal loan.
Your Credit Score is Critical
One of the very first things you should consider before applying for a personal loan is your credit score. Your score will often determine the number of factors when it comes to your loan request. This includes your eligibility for a loan, as well as the terms that come with it. The best route to take then is to make sure that your score is as high as possible before even considering asking for a loan.
You may accomplish this by doing several things such as paying off debts, pay more than the minimum each month, and even contact the organisation you owe money to to negotiate a better payment plan. The faster you do this, the quicker you’re on your way to obtaining a proper personal loan.
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Do You Need a Cosigner? Do You Have Someone Available?
Let’s say that you simply can’t wait to fix your credit score. That’s okay; there are other options for obtaining a personal loan without having an incredible credit score. One of the things you may be required to get is a co-signer. Note that you are taking a significant risk when bringing in a cosigner. Some of these include destroying not only your credit score but your cosigner’s as well. In more severe cases, they could even go after their possessions. So, always make sure that you read the fine print very carefully before going forward with the process.
You Have Lender Options
Just because you need money does not mean you should accept the first offer that comes your way. The best thing to do for your finances is to shop around as much as you can. You may find that some lenders may offer you incentives such as six months interest-free loans. Take your time, weigh out the pros and cons of each option, and make the best-educated decision for yourself.
Does Your Loan have Restrictions?
One of the most common mistakes made by people seeking a personal loan is not looking if there are any loan restrictions attached to the contract. For example, if you’re looking to pay for a wedding, certain loans might not allow you to do that. Therefore it is paramount that you ask about any restrictions attached to the loan.
Prepare All Your Documents
Before you apply for a personal loan, you should make an effort to collect all your documents. The fact is that lenders will often require a ton of proof to get you the best deal possible as well as to protect themselves. Some of the documents you will need are proof of income, such as pay stubs, as well as proof of asset ownership, to name a few.
Avoid Seeking New Credit Lines
Earlier, we spoke about the importance of having a good credit score. If you have a good score at the moment, there is one thing you need to avoid doing, and that is applying for new lines of credit. You might be short on cash, but this is not the time to apply for credit cards and a loan. The reality is that each time you apply, you are bringing down our score, even more so when you are rejected.
Know What You Need
It’s easy to think about getting a loan because you need money, but the best thing you can do for yourself is to know what you need. Variables such as loan amounts are something you should not only contemplate with yourself but also with your lender. You don’t want to end up taking out more than you need and thus finding yourself paying higher monthly payments along with interest.
Seeking to obtain a personal loan is a great way to get the funds you need as well as building great financial standing for yourself. However, before you do so, you need to have the proper knowledge of the process. Simply adhere to the information above to start your journey on the right foot.
By: Raymond M. James
About The Author:
Ray is a sought after thought leader and an expert in financial and money management. He has been published and featured in over 50 leading sites and aims to contribute articles to help novice financial planners. One of his goals is to impart his knowledge in finance to educate and help ordinary people create and achieve their financial goals.