What Are the General Steps to Prequalify for a Personal Loan?
Prequalifying for a personal loan may be the way to go if you need a personal loan but want to avoid the hassle of a formal application. This process allows you to get personalized loan information without damaging your credit score and can give you a better understanding of your loan options and terms. While prequalification is not a guarantee for loan approval, it is a great way to obtain pre qualified loan offers.
This article will outline easy steps to follow when prequalifying for a personal loan.
What Does It Mean to Get Prequalified for a Personal Loan?
Prequalifying for a personal loan involves providing basic information to a lender, who then checks your credit to assess your creditworthiness. The lender will consider various factors like your repayment history and outstanding debts to evaluate the risk of lending to you.
If you’re prequalified successfully, the lender will provide you with loan details that you’re eligible for depending on how much you want to borrow, your income, and your debt. However, prequalification doesn’t guarantee approval, and you’ll still need to complete a full application and provide additional documentation and information for a hard inquiry on your credit report.
4 Easy Steps to Prequalify for a Personal Loan
- Determine Your Budget
Apart from your credit score, lenders will consider your income, available credit, and current debt obligations to determine the appropriate loan amount. To establish your budget, you can calculate the monthly loan payments and compare the amount to your monthly income. This comparison is called the debt-to-income ratio, which helps you determine a reasonable monthly loan payment that suits your financial circumstances.
- Research Lenders
If you are looking for easy loans to get online, you may want to consider prequalifying for personal loans through online lenders to simplify finding a lender that meets your needs. Online loans have several benefits, including more flexible credit requirements that consider more than just your credit report. The application process for many online lenders is simple and quick, and you can receive a decision on your loan application faster than any alternatives.
- Fill out a Pre-qualification Form
You can fill out a form on the lender’s website to prequalify for a personal loan. The form will require you to provide personal details such as your name, date of birth, and Social Security number. You’ll also need to provide the following:
- Contact details like your address and phone number
- Your employment and annual income
- Financial information like savings, retirement, and investment accounts
- The desired loan amount and loan purpose
- Your current outstanding debt, chosen loan term, and credit score range
- Undergo a Soft Credit Check
Prequalifying for a personal loan won’t impact your credit score, as lenders only perform a soft credit check. This type of credit check doesn’t appear on your credit report, so it won’t affect your chances of getting a loan from multiple lenders. You’ll be asked to submit a full application if you receive a pre-qualification offer. At this point, the lender will perform a hard credit check which will appear on your credit report for up to two years.
Next Steps after Getting Prequalified
After submitting a loan prequalification form, you should receive immediate results. When prequalified for a personal loan, it is important to carefully review the offer, paying attention to details such as the total loan amount, interest rate, and term.
- Review Interest Rates and Fees
It’s important to review the annual percentage rates (APRs) and upfront fees of your loan options to compare the cost of each loan.
- Check Loan Terms
Choosing a shorter loan term may result in higher monthly payments with lower interest rates, so weighing the tradeoffs between lower payments and long-term savings is important.
- Consider Funding Timeframe
A lender that provides next-day or same-week funding may become your top choice if you require fast access to funds.
- Look for Borrower Perks
Some lenders offer borrower benefits like interest rate discounts for autopay and payment relief options, which could be deciding factors if you’re considering similar loan options.
Prequalifying for personal loans is the best way to get personalized loan offers without hurting your credit, as it doesn’t require hard inquiry. Following the above steps, you can increase the chances of prequalification and finding the right lender.