If you are considering opening a personal loan, now might be the time. With recent interest rate hikes and more forecasted to come, locking in a rate now makes good financial sense. Instead of paying high credit card balances, you can take out a personal loan that has a much lower percentage rate, which means throwing less toward the interest and paying down the principal on your loan amount.
Before you approach lenders to take out a personal loan, there are some things that you need to know and some ways to increase the likelihood of being approved. These facts can also help to expedite the loan approval process. They are also precautions you need to know that can affect your credit score or rating in the future.
- When you apply for a personal loan, it involves a credit history check
To determine whether someone will loan you money or not, they need to know what your credit history is. The only way to know is to do that is to run a credit history check. When the lending institution checks your credit, it will be a knock on your score. Every time that a creditor looks at your credit history, it has the potential to lower your rating. So, only go to those lenders who you are serious about and wait for approval or a decline before applying for another.
- Some lenders need more than just credit score history
Some lenders will want more than just a credit check. They will likely need answers regarding your assets and other debts and loans so that their underwriters can determine whether you are a risky borrower or not. Make sure that you have the documentation necessary so that when you apply, you don’t have to go back and forth a hundred times. They might need information about insurance, your savings, assets and even evidence of any financial responsibilities that you have in your budget.
- Loans have something called origination fees
An origination fee is typically one to five percent of the total loan amount. When you are borrowing money, make sure to add the fee to the amount that you will have to repay so that you aren’t surprised by the total loan repayment amount.
- Don’t miss any payments
The lender will want to see that you have a steady history of making payments. If you go just 30 to sixty days past your due date on any debts, that can negatively affect your ability to borrow money. A steady history of making payments on time is critical to getting approved for a personal loan.
- Personal loans usually have lower interest rates than credit cards
If you are carrying a revolving balance on your credit card, then you are throwing money out the window. The percentage rate for credit card interest is going to be substantially higher than a personal loan. That is why now might be the best time to take out personal loans in Winnipeg, to pay off your revolving debt.
- Only borrow money that you need
If you already have a large amount of debt, don’t borrow more to dig a bigger hole. It is okay to take out a personal loan to pay down your debt, but not to compound it. Whatever it is that you are taking out a personal loan for, make sure that you are in a good financial spot to do so.
- Personal loans do jeopardize your home
If you own a home and are considering taking out a home equity loan, it is important that you understand that the money that you are borrowing is value against the equity that you have in your house. If you don’t repay the loan, the lender is liable to go after your home to recoup the cost.
If you are going to take out a personal loan, the conditions are perfect to do so now. Just make sure that you are taking it out to get yourself into a better financial situation instead of a worse. Paying down revolving credit card balances are a good thing, taking out a personal loan just because you can, isn’t.