Top Reasons To Get Prequalified For A Personal Loan
A personal loan can come in handy if you need money to finance a large purchase, consolidate credit card debt, or cover unexpected expenses. However, personal loan lenders will look at your credit score and other financial information when evaluating your loan application.
While applying for multiple personal loans seems like a good idea to boost your chances for affordable rates and approval, doing so doesn’t guarantee you anything. Plus, it can hurt your credit score. This is where prequalification comes into play.
Although many don’t consider it essential, getting prequalified for a personal loan can make a difference in your loan application. To help you understand better, here are the top reasons why you should get prequalified for a personal loan.
What Is Prequalification?
Prequalification is a process when the creditor or lender runs a basic review of your personal finance history to determine if you’re a likely candidate for a loan or credit card. Basically, it’s an initial and less rigorous assessment of your eligibility to get a loan.
When you begin the process of personal loan prequalification, you still have to provide some basic information like the amount of money you want to borrow, current income, and debts. Bear in mind that the information the lender will require may vary.
If you get prequalified successfully, the lender will give you a ballpark figure of how much you might be able to borrow, your potential interest rate, and other loan terms. But note that it doesn’t guarantee approval. The amounts and terms quoted are not yet final since you still have to apply and provide more documentation that could change the lender’s offer.
Why Should You Get Prequalified For A Personal Loan?
It’s important to note that pre qualification provides a clear path forward for your loan application by ensuring that you meet the basic requirements that would make you eligible to get the funds you need.
If you’re having second thoughts about undergoing this process, we’ve highlighted why getting prequalified for a personal loan is essential.
Gets A Chance To Figure Out Your Eligibility
Since the lender will assess your financial capability during the prequalification process, you also get a chance to know where you financially stand. If you find out that you don’t prequalify for a personal loan, it’s a prompt that you have to get your finances and qualifications in order.
The earlier you discover that you’re not eligible for the loan you need, the more time you’ll have to work on other possible options. It also gives you the opportunity to make adjustments to your preferences and financial endeavors.
Gives You An Idea Of What You Can Afford
Getting prequalified gives you an idea of how large of a personal loan you can afford. Since the lender can provide you with the prospective interest rate and payment quote, you’ll have time to review it and ensure you can really afford the monthly payment. By going through a prequalification, you can avoid the sticker shock of some personal loans.
Allows You To Find The Best Loan
Prequalification doesn’t involve a hard inquiry, which means that it won’t hurt your credit score. By getting prequalified from multiple lenders, you can shop around and compare different loan length options, interest rates, fees, and loan sizes. With a prequalification, you’re able to find the loan that works best for your needs and budget.
Gives You Time To Improve Your Credit
Your credit score is essential in your ability to prequalify and get approved for a loan. It also has a significant impact on the terms and interest rate the lender will charge you. If the interest rates you get in the prequalification process don’t suit you, you can have more time to work on your credit. Then you can try prequalifying again later when your credit improves.
How To Get Prequalified?
There are different ways to get prequalified for a personal loan. Lenders may require different levels of information and documentation. Some may only depend on the information you provide, while others may delve into more detail to decide whether you’re eligible or not. But all of them will require additional information if you decide to proceed with your application.
Typically, a personal loan prequalification is fast and easy. You can do it online and have an idea of what might be available to you in as little as a few minutes. For reliable sources, you might consider checking out websites like Creditninja.com and see how it works. Note that the whole prequalification is a quick process and getting an initial quote of the loan you want.
Prequalifying for a personal loan may sound unnecessary, but it can lead you to the best possible option. Since it’s usually free and won’t hurt your credit score, you won’t lose anything. Don’t worry if you get declined for your prequalification. Just find out why you were not prequalified so you’ll know what to do to improve your chances of getting a loan in the future.