Do you need a new car or repairs on the one you have? Did the washing machine just flood your basement? Is your computer so old you it has never visited the Internet? Whatever the reason you need extra cash, the right vehicle for borrowing the needed amount is probably a personal loan. It is the least complicated of all the loans and the fasted to be approved. There are two types of personal loans, which are secured and unsecured.
The Application Process
Be prepared when you apply so the entire process can be completed in one session. You will be required to complete a credit application, which will ask for your Social Security number in addition to the following information:
- Your name
- Current address
- Previous addresses
- Current employment
- Previous employment
- All sources of income
- Gross monthly income
- Current credit accounts
- All outstanding debt
- All bank accounts
This information will be used to check your credit report and history. All of the information gleamed from the report will be used in determining how creditworthy you are and if you are likely to make all your payments and repay the loan on time. The information on your credit report is crucial as it is what the lender’s decision will be based upon. It’s a good idea to check your credit report before the lender does and make sure all the information is correct and up to date.
Will You Need To Purchase Credit Insurance?
The purpose of the insurance is to assure repayment of the debt in the event the borrower becomes disable or dies. In most states credit insurance is optional. You should consider your health and age when deciding if you want to purchase the insurance. If something happened to you and the debt was not paid, the lender would take recourse against your estate or confiscate the collateral if it was a secured loan. Federal law requires a borrower to sign a statement to that effect if he or she wants to have credit insurance, and the cost of the insurance must be in writing to be in compliance with the law. The borrower may request a copy of the insurance from the creditor.
Will You Need A Cosigner?
If this is the first time you have applied for credit, your income is too low for loan qualification, have poor credit, excessive debt, or seasonal income, you may be required to have a cosigner. The cosigner accepts equal responsibility for the loan and the borrower’s account history will go on the cosigner’s credit report. You can understand why it is often difficult to find someone to cosign a loan.
What Happens When You Are Late With A Payment?
If you realize you are going to be late with a payment, the first thing to do is contact your creditor. The lender is usually willing to work out a repayment program. Tell the lender if this is a one-time event due to illness or if you have lost your job and may miss more than one payment. In the latter case, you may be offered a chance to refinance the loan.
Anytime you take out a loan you place your income at risk. Only go forward with a loan application when you are sure you can make the payments on time for the full length of the loan.