Personal loans can be helpful in times of need, such as to pay medical bills, car repairs, or home improvements. This installment loan is very popular among borrowers since its interest rate is usually lower than credit cards or personal lines of credit.
However, obtaining a personal loan with favorable terms can be hard. It’s especially difficult if you have a bad credit score, and that’s where preapproval comes in.
When you go through a preapproval process, you get a preview or snapshot of the terms you’re likely to qualify for, which can help you shop around for the best deal. While it’s not a guarantee of loan approval, it can give you a good idea of what to expect.
What Does It Mean to Get Preapproved for A Personal Loan?
Personal loan preapproval is a preliminary step in shopping for a personal loan. Essentially, it prescreens you before completing the loan application. When you go through the process, the lender tells you if you’re likely to get a loan and what interest rate and terms you can expect if you do.
Starting the process is easy. First, you’ll need to provide basic information, such as your employment history, income, debts, borrowing limit, and the reason for taking a loan. But take note that the requirements will vary from lender to lender.
The lender will do a soft credit check based on the information you provide. They will look at your creditworthiness, including your credit score and debt-to-income ratio, to decide if you’re eligible for low fee online loans and what interest rate to offer.
If you’re preapproved, the lender will estimate the interest rate and monthly payments you can expect for the loan. And if you like what you get, you can submit a formal loan application.
However, preapproval for a personal loan does not ensure a loan approval. The lender will still evaluate your entire financial profile before making a decision.
Will A Preapproval Affect Your Credit Score?
Lenders run a soft inquiry on your credit score while assessing your application for preapproval. Consider it a non-official credit check request. The lender gets to review your report containing your credit history and credit score, but this request won’t impact your score.
So, if you’re considering applying for a personal loan, getting preapproved could help you determine your eligibility.
How to Get Preapproved?
The first thing you need to do is create a list of the lenders you want to approach or the ones that best meet your needs. Since most lenders allow you to view your loan offers without affecting your credit score, try to list as many as possible.
Here’s how you can find the best lenders for your situation:
- Check the loan amount. Suppose you need $50,000, but the lender only offers loans up to $30,000; there’s no point in pursuing a preapproval with that lender.
- Verify the lender’s loan terms.
- Check the credit score requirements. Many lenders work only with credit-worthy people, while others are more flexible.
- Check any appealing offers the lender might have. Many of them offer perks for timely payments or lower interest rates for certain groups of borrowers. While it’s not the main reason to consider a lender, it could be a generous bonus.
- Once you’ve sifted your list, you can start the preapproval process with your chosen lenders. There are several ways to do it. You can go to the lender’s website, give them a call, visit a branch, or speak to someone in person.
The preapproval process will vary slightly from lender to lender, but they all follow the same general steps:
- You’ll need to provide personal information, such as your name, address, Social Security number, and date of birth.
- The lender will check your credit score and report.
- If you qualify, you’ll receive a preapproval offer, which will include the loan amount, interest rate, and other essential details. If you don’t, the lender will let you know why.
- Then, you can either accept the preapproval offer or keep shopping around for a better one.
- If you do accept, you’ll need to provide documentation to support the information you provided earlier. It could include tax returns, pay stubs, and bank statements.
It’s not hard to get preapproved for a loan. You just need to be organized and patient while the lender does the job.
Conclusion
Not all loan offers are equal. So, it’s important to compare your options before you decide to take one. And the best way to do that is to get preapproved for a loan. It gives you some advantages, like knowing how much interest you’ll pay, the loan term, etc.
COMTEX_407103267/2757/2022-05-12T12:57:52