How to Prequalify for a Personal Loan Online
When it comes to personal loans, many consumers are hesitant to explore their options for fear of the negative impact it will have upon their credit reports. And while it’s true that taking out a personal loan does typically result in what’s known as a “hard inquiry” on your credit record, there is a way to evaluate your loan options without the worry that your credit score might come crashing down. This is called personal loan prequalification, and it’s an easy way for aspiring borrowers to evaluate their options without committing to a specific lender or seeing their credit score suffer.
If you’re interested in learning about how to prequalify for a personal loan, this overview will tell you everything you need to know.
5 Steps to Prequalify for a Personal Loan
If you’re ready to find out if you prequalify for a personal loan, here’s a rundown of the typical process.
- Start by doing your research and identifying reputable lenders that operate in your area. Visit their website, and fill out a pre-approval form, which usually includes information such as your occupation, annual income, and current debt.
- Based on this information, the lender will perform a soft credit check to evaluate some cursory information about your general creditworthiness. This gives them a sense as to whether you represent a risk as a borrower.
- Next, the lender returns a decision regarding your application. If you’re denied, that’s pretty much the end of the line with this lender. Try looking elsewhere! If you’re approved, you’ll be presented with some estimated terms if you proceed with the process.
- This is when you choose to either accept or pass up this pre-qualified offer. If you accept, you’ll often be required to submit more information, which could include bank statements and previous years’ taxes. If you need more time to think it over, most pre-approval quotes remain valid for several days or weeks before the lender requires borrowers to fill out another application.
- If your completed loan application aligns with the information you initially provided, you’ll usually receive your loan within 7 to 10 business days.
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Why Get Pre-Approved For a Personal Loan?
Personal loan prequalification, also known as personal loan pre-approval, is an excellent option for borrowers in today’s marketplace. That’s because this process lets you find out which lenders are likely to approve you for a loan, and it allows you to compare the amounts, interest rates, and repayment terms you’re likely to qualify for. And the best part is, you’re not risking anything when you apply to prequalify for a personal loan online. There are no consequences at all.
Does Pre-Qualification Impact My Credit Score?
When you apply to get prequalified for a personal loan, your credit score won’t be affected in any way. That’s because there’s no hard inquiry involved with the preapproval process. Instead, the application process for a personal loan is based on more basic, general information provided by you, the borrower. Lenders use this information to determine whether you’d qualify for a loan, and, if so, what your terms are likely to be. However, the figures lenders provide at this stage won’t necessarily match up with the final terms you’re offered. But if you’re honest with regard to the information you provide, there shouldn’t be any big surprises if and when you opt to move forward with a lender’s formal approval process.
What’s the Difference Between Prequalification and Pre-approval?
While exploring your borrowing options, you’re likely to come across the terms “pre-qualification” and “pre-approval” quite often. At this point, you might be wondering what the difference is between these two phrases? The truth is, there really isn’t any. Different lenders are increasingly using these terms interchangeably. So don’t allow the lingo to throw you off track. Prequalification and preapproval essentially mean the same thing in the realm of personal loans.
What Happens After Applying For Pre-Qualification?
Once you’ve filled out an application to prequalify for a personal loan, there are two basic ways things could go: either you get approved or you don’t. In some cases, the lender might not tell you right away, instead instructing you to keep an eye on your mailbox for a final decision to arrive in a few days. (This isn’t often a good sign, yet it’s doesn’t always mean an applicant isn’t approved.) In most instances, however, you’ll be transferred to a web page that either congratulates you on getting approved or one that apologizes for not being able to offer you a loan. If you are indeed approved, you’ll likely be presented with general terms that you qualify for as a borrower. Remember, these numbers aren’t set in stone and depending upon the outcome of completed loan application, the terms could vary a little — or a lot.
Prequalify for a Personal Loan with Bad Credit
If maintaining a clean credit report hasn’t always been high on your list of priorities, you might be wondering, “Can I get prequalified for a loan if I have bad credit?” Well, the good news is that there are so many lenders out there, that at least one of them is likely to prequalify you — unless, that is, your credit score is incredibly low. For the majority of less-than-perfect borrowers, however, it’s very possible to prequalify for a personal loan with bad credit. Just be prepared for the reality that you’ll pay higher interest rates than more well-qualified candidates.
How to Improve My Chances of Prequalifying?
If you want to improve your odds of prequalifying for a personal loan, start by taking a good look at your complete credit report. (You can do that for free on any number of reputable sites including annualcreditreport.com.) If you spot any errors on your report, contact the major credit bureaus to have those incidents investigated as soon as possible. Also, make sure to pay down any outstanding bills and consider transferring credit card balances around if it means lowering your credit utilization on certain accounts. If you haven’t always been the most responsible borrower, and you’re not in a huge rush to take out a loan, spending six months cleaning up your credit report can help you qualify for a considerably lower interest when it comes time to formally apply.