Apply for a Small Personal Loan Online

Many people know what it's like to be short on money at a time when they need every penny they can get. It's one thing to need money to fix up your home or buy a new car, but what can you do if you just need a bit more to take care of some short-term unexpected expenses? While many people in these situations run up credit card bills or seek the help of questionable payday lenders, there are other solutions. Small personal loans--a loan in which the borrower puts up no collateral--are available from reputable financial institutions, and now you can even apply for them online. No matter the lender, you will best be able to protect yourself and your interests if you understand the process and know how such a loan is secured. Following these steps can help you get the loan you need.[1]

Steps

Doing Your Homework

  1. Obtain your credit score.[2]
    • Get your credit score from a reputable third party service and inspect it for anything that may be a problem.
    • The most commonly used systems of credit scores uses a number ranging from 300 to 850 to represent your credit. Higher numbers indicate that you are a good credit risk.
  2. Understand how you will be assessed. You must understand how your income, credit score, and other factors will be used to calculate the riskiness of the loan (and thus your interest rate).
    • The most commonly used form of credit score--the FICO score--is made up of grades based upon your payment history (35%), the amount you currently owe (30%), the length of your credit history (15%), the types of credit you have used (10%), and the number of new credit inquiries made recently (10%). [3] Of course there is more than one type of credit score and they can differ from each other pretty substantially. Understand those factors before you obtain your credit score.
    • A bad credit score can result in the rejection of your application, or the lender may demand that you pay higher interest rates.
  3. Think about fixing your credit score before applying for personal loans. While you may be able to improve your credit score by paying off creditors, not all methods require you to spend money (and, after all, that is what you require right now). In some cases, you can actually improve your score by taking out extra lines of credit. You may want to consult a finance specialist at your bank for advice on how to boost your score.
  4. Shop around for the loan that fits your needs. In particular, assess current market interest rates. When you know how your credit measures up, take a look at the best market interest rates available and do some basic calculations to see the APR or interest rates for which you qualify.
    • The terms of the loan will differ with each lender, so make sure you can make apples-to-apples comparisons. For example, some may have lower interest rates but call for the loan to be paid off over a longer period of time (and some will hit you with penalty fees if the loan is paid off too quickly).[2] If you could technically afford to pay it off faster, then the slower form of repayment could actually cost you more than a shorter-term loan with a slightly higher rate of interest. Calculate the total costs that could be incurred for each potential loan option and consider the best method you can use to pay it off. You must consider this before you make your choice.
    • Shop around between established national and local lenders. Compare a credit union's deal to what you would get from a large national bank. Always evaluate which small personal loans will allow you to borrow for less.
  5. Consider microlending. Online microlending matches borrowers with individual smaller lenders in ways that can help both parties profit from a small loan transaction. What began as a program to help small entrepreneurs in developing countries has become a new form of credit for those in the developed world who are trying to get back on their feet.[4]

Securing the Loan

  1. Protect yourself. You are about to transmit sensitive information over the internet. Also, you must make sure you are applying with a reputable lender. Some supposed online lenders are scams, others just have a reputation for taking advantage of the vulnerable. [2]
    • Always inspect the website for legitimacy before providing personal information. Some online personal loan sites can be complicated scams. It may be necessary to call and get more information about a company before handing over your information online.
    • Find third-party reviews of the company and their online loan branch. Two of the most reliable sources are the Better Business Bureau and the Federal Trade Commission. Both have websites that you can use to learn about the company you will be dealing with.
    • Think about the security of your Internet connection. Take reasonable steps to prevent data loss, identity theft or similar problems. If it can be avoided, do not use public networks.
  2. Begin the application process. Fill out the online form. If you have selected a legitimate lender, you should not feel insecure about providing the sensitive information that will be required.
    • You will probably be required to list information such as the name of your employer and the total of your annual income.
    • Request a reasonable amount. The average for a small personal loan is about $2,500. Because this is a loan in which no collateral is risked, lenders will be hesitant to take a chance on you without substantial evidence that the loan will be paid back.[5]
  3. Read your loan agreement carefully before agreeing. Though you probably saw some of the terms and conditions earlier as your were shopping around, look out for additional items that are outlined only during the application and confirmation process.
  4. Sign and submit the agreement. Most of these forms will actually employ a digital signature of sorts rather than an actual signature.[6] You should be contacted in a matter of days and informed about the status of your loan application. Some additional forms may have to be filed as a final confirmation of your identity.

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Sources and Citations

  1. ↑ http://www.investopedia.com/terms/u/unsecuredloan.asp
  2. ↑ 2.0 2.1 2.2 http://www.nerdwallet.com/blog/finance/money-nerd/banking-and-loans/cheap-personal-loans/
  3. ↑ http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx
  4. ↑ http://www.accioneast.org/home/support-accion/learn/microlending-in-the-united-states.aspx
  5. ↑ http://www.foxbusiness.com/personal-finance/2012/03/07/personal-loans-on-rise-but-are-right-for/
  6. ↑ http://www.arx.com/learn/about-digital-signature/digital-signature-faq/
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