Do you want to qualify for a loan but don’t know the process? We discuss the steps you need to take to qualify for a loan right here.
Pre-qualifying for a loan is the first step in the process of loan approval. It provides lenders a chance to preview your creditworthiness and allows you to preview the loan you will receive. However, getting pre-qualified for a loan doesn’t guarantee that you will get the loan. Most lenders will verify all the information before they approve your loan.
If you want to know how to qualify for a loan, you have come to the right place. We will outline all the steps in the loan approval process to give you a complete idea. Here is what you must do:
1.Fill the Form for Pre-Qualification
Most lenders will let you qualify for a loan on their website, where you must fill an online form with the following information:
•Your personal information, such as your date of birth, name, and Social Security number.
•Your contact details like your phone number and address.
•Your employment details,including your annual income.
•Your financial account information, like if you have investment or retirement accounts and savings.
•The loan amount you want, repayment terms, and purpose of your loan.
As the terms and rates for loans vary from lender to lender, it is advised to pre-qualify for multiple loans so that you can compare the offers. They will include the interest rate, the amount you have qualified for, and the loan terms.
2.Get a Soft Credit Check
Your credit score won’t be impacted when you pre-qualify for a loan. After you have submitted the form for pre-qualification, the lender will perform a soft credit check to determine if you have creditworthiness, and it won’t show up on your credit report.
If you decide to continue with your loan application after the pre-qualification, your lender will check your financial history by performing a hard credit check, which will show up on your credit report for around two years and may cut a few points from your score temporarily.
3.Learn If You Have Been Approved
Most personal loan lenders will look at your credit score, which determines how well you manage debt. That’s why it is important to build a strong credit history,which increases your chances of qualifying for a loan. For that, you must pay your bills on time, pay your credit card balances every month, and keep your overall balances low to manage your debt.
You can boost your loan approval odds by acquiring a secured loan, where you must put up collateral such as your savings account or your car to guarantee the loan. It’s easier to get approval for a secured loan, but you may end up losing the collateral if you don’t make your payments.
4.Apply for the Money Formally
After you have submitted your form for pre-qualification, you will receive the loan repayment terms. If you’re satisfied with the repayment term, interest rate, and loan amount, you can apply formally for your personal loan. That will involve uploading documents of your finances, such as recent tax returns and bank statements, which the lender will use to verify the information submitted by you in the pre-qualification form.
Also read: Personal Loan: How to Apply for it
Once the lender performs a hard check on your credit, you will be approved, and the lender will deposit the money into your checking or savings account the next business day. Most lenders can take up to a week before approving and funding the loan amount.