Is Prequalifying for a Personal Loan a Smart Move?
If you want a personal loan, it’s best to get pre qualified first. Doing so can help you compare loan offers from multiple lenders without hurting your credit score.
When it comes to prequalifying for a personal loan, lenders will look at your creditworthiness and give you a glimpse of the loan you might receive if you continue on to the loan application process.
Why Should You Get Prequalified?
Prequalifying for a personal loan can provide you with multiple advantages. Just like applying for a personal loan, the lender will evaluate your financial capability and decide whether to lend you some funds through a soft inquiry. In addition, this is usually done by providing some basic financial information like your income, employment, and others.
Getting prequalified for a personal loan is not an assurance of loan approval. Instead, it can give you a preview of the personal loan you might receive and determine if you’re an excellent applicant. Conversely, if you aren’t a strong applicant, getting prequalified can also help you know what areas you need to improve to get higher chances of loan approval.
When it comes to taking out personal loans, shopping around makes sense. You can do this by getting prequalified by multiple different lenders, including a lender of online loans, to help compare their offers. Concerning this, you can compare options for estimated interest rates, loan size, length, and fees.
How To Get Prequalified
You can find multiple ways to get prequalified for a personal loan online. You can opt to visit the website of the lender of your choice, whether an online lender or a bank and follow the steps of the prequalification process.
It’s best to remember that you might need to fill in some necessary information when getting prequalified, which includes the following:
Income
Credit score
Desired loan term
Desired loan amount
Reason for borrowing
Current outstanding debt
The personal loan prequalification process tends to be fast. If you’re lucky enough, you can get immediate results. Once you get loan offers from a different lender, it’s best to compare them by following these tips:
Look At The Rates and Fees
It’s best to review the loan offer by considering the interest rates and fees. Consider if the annual percentage rate is favorable on your end. Also, ask the lender about fees that will add to your total loan amount.
Review The Loan Terms
Typically, when you choose a shorter loan term, you’ll pay less in interest during the life of the loan with a higher monthly payment. On the other hand, when you get a longer loan term, you’ll get a lower monthly payment with higher interest rates to pay in the long run. It’s best to decide which matters most to you: long-term savings or a lower monthly payment.
Evaluate The Funding Timeframe
There are lenders that will take time before you can get your loan amount once approved. On the other hand, some lenders can also provide you with the funds you need in just a few hours. Checking the funding timeframe is crucial, especially when you need the money immediately.
Look for Borrower Perks
Some borrowers might offer perks. For example, this may include an interest rate discount in exchange for applying for autopay. Looking at borrower perks can help you a lot when you have to decide between two similar personal loan offers from different lenders.
What Happens Next?
As mentioned earlier, getting prequalified doesn’t guarantee loan approval. So, there’s no reason for you to celebrate just yet. Instead, getting prequalified means you’re one step closer to taking out a personal loan.
The interest rates and other loan terms provided to you during the prequalification process are just estimates. Once you submit a loan application, the lender can change them based on their assessments. The loan application process usually involves a hard inquiry, affecting your credit score.
What If You Got Denied During Prequalification?
If you can’t get prequalified for a loan, go and ask the lender the reasons for their decision. Then, take that information in and work on ways you can improve on them. In addition, doing so can help increase your odds of taking out a personal loan.
To Wrap It Up
Besides determining your chances of getting approval, prequalifying for a personal loan is also a great way to find the personal loan that best fits your needs. Lenders will run a soft credit inquiry to determine what personal loan offer you might qualify for without hurting your credit score.
However, it’s crucial to remember that prequalifying for a personal loan isn’t a guarantee for loan approval. So, you still need to submit a personal loan application (which the lenders will strictly assess) and hope for the best.
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