The first step to applying for a loan is to get prequalified for it. The prequalification process enables the lender to determine how well you can repay the loan. It also gives you some ideas on what terms you will receive for the loan. However, prequalification is not a way of guaranteeing your loan. Getting prequalified for a loan is easy.
Prequalification and preapproval are the two terms that are often used in the loan application. Both terms are often used interchangeably and they are used to indicate conditional acceptance of a loan. Pre Approval is like you get a letter stating that you are preapproved for the credit card. The prequalification process is usually less rigorous. You still need to complete an application if you decide to go ahead in applying for the loan. Banks and credit unions are not the only finance and loan resources. Nowadays, you can apply for personal loans from online lenders.
To get prequalified, you need to fill out the loan request form on the lender website. You can also find this form at a website that aggregates loan options. In the loan aggregate site, you need to look for buttons that state check your interest rate, check your loan options, and apply now. You need to provide basic personal information such as name, birthdate, social security number, address, and phone number. You also need to provide information on your employment and financial account. In the form, you must state the loan amount you want to borrow, what you intend to use the loan for, and your choice of the repayment term.
During the prequalification process, the lender will run a soft credit check which will not have any impact on your credit score. This means that it will not show up on your credit report. Getting prequalified assures you that you can afford the monthly payment before you go ahead to apply for the loan. Getting prequalified with multiple lenders allows you to compare your loan options. You have the right to accept or reject the loan offer.
The lender will send you an email that provides information such as the total loan amount, interest fee, and term when you get prequalified. You can check whether you have to pay origination fee and prepayment penalty fee. You can ask the lender about the fees that you will be charged for the loan if the information is not provided in the email. You can formally apply for the loan after you have selected a loan from the loan offers you receive. You may have to submit additional documentation such as income verification, and income tax if you decide to apply for the loan.
After you get approved, make sure you review the loan documents and final terms. You should check the fees again and make sure you can afford them. It is normal for a lender to charge an origination fee in the loan. The origination fee will be deducted from the loan amount before the funds are being released to you. Sometimes, the origination fee adds up into the APR. To accept the loan offer, you will be required to sign the paperwork. Upon signing the paperwork, you are agreeing to its terms. Thereafter, it can take a few hours to a few days for the lender to deposit the fund into your account.