As of May 2020, the total outstanding household credit in the US reached more than $16.14 trillion. Of this figure, over $4.19 trillion was for consumer credit alone. Either way, both showed an annual average increase of more than 5%.
All that signifies that consumers applied for more loans as well as bigger loan amounts. It also implies that lenders approved more applicants. At the very least, it indicates that lenders approved applications for larger amounts.
With that said, if you’re planning to apply for cash loans, you’d want to make sure your first try gets approved. This way, you can get the funds you need ASAP. This also helps you limit hard credit checks, which can lead to a lower credit score.
Don’t worry, as this post will explain everything you need to know on how to get a cash loan. Read on so you can take the proper steps and raise your odds of getting approved.
1. Determine Where Your Credit Score Stands
A credit score is a number that ranges from 300 to 850, and it portrays a consumer’s creditworthiness. The higher this score, the greater the chances of a borrower qualifying for a loan. Moreover, lenders often reward applicants who have high scores with low-interest rates.
In the US, there are several credit scoring models used, but FICO is the most common one. As of the second quarter of 2019, the average FICO score was 703, a number that falls under the “good” range. At the same time, 58% of consumers fared even better, having a score higher than the mean.
With that said, one of the first steps to getting a cash loan is to confirm your credit score. In doing so, you can determine if you are creditworthy enough to deserve low rates.
At the same time, you can ensure that your credit report is clean, as reporting errors can cause a drop in your score. Know that credit reporting mistakes are common, affecting one in five consumers in the US. That’s why it’s vital to first request free copies of your credit report prior to taking out cash loans.
Scrutinize everything in your credit report to make certain that it’s factual. Even a single mistake, such as one that implies you missed a loan payment, can already bring your score down. If you apply for a loan with such errors, lenders may charge higher rates, if they would even grant you a loan at all.
In case you do find inaccurate numbers in your report, dispute them as soon as possible. Once the reporting bureau has corrected them, you can then apply for cash loans.
2. Compare Interest Rates and Loan Offers
Traditional banks accounted for 28% of all personal loans issued in the US in 2018. By contrast, financial technology (“fintech”) companies issued a staggering 38% of such loans. This means that fintech lenders provided more personal loans than conventional lenders.
The above also means that banks are no longer your sole option when taking out a cash loan. You should also apply with fintech companies, which even specialize in online applications. Moreover, most of these online lenders often have more relaxed lending standards.
Traditional banks are still a good choice, though, as they usually charge lower rates. However, they have tightened their lending standards even more in recent years. In fact, 18.4% of banks surveyed in early 2020 said they plan to tighten their credit card issuing standards.
What’s vital is to compare as many of these lenders’ estimated rates and offers before you apply. You can use lender comparison sites that can help you access loan offers from many lenders. These platforms also provide a breakdown of each option, such as interest rates and terms.
As you compare offers, take a close look at the interest rate: the higher it is, the more expensive the loan will be. If you have a “good” (or even better) credit score, then you should qualify for a lower rate.
You should also consider the loan term, which is the length of time that you can pay back the loan. The longer this is, the lower your monthly payments, but the total cost of the loan will also be higher.
3. Check and Complete the Lender’s Requirements
After reviewing your loan options, decide which one offers the best deal at the lowest rate. Then, look at the “difficulty” level of their application, especially their required documents. Aside from credit scores, other typical lender requirements include the following:
- Proof of employment
- Proof of residence
- Social security number
- A list of other current loans, if any
- A copy of your driver’s license
Know that many lenders, especially banks, conduct hard credit checks, too. The thing is, a hard credit check can take a few points off of your credit score. As such, it’s best that you apply with only one lender at a time.
Once you’ve furnished all requirements, you then have to wait for the lender’s decision. This “waiting game” is what the lending industry calls the “underwriting process.”
There’s no standard time, but banks may take a few days or even weeks, to review applications. If you apply with a fintech company, though, you can expect a decision in one to two days.
If you qualify, the lender will furnish you with the loan contract. Make sure you read this from start to finish so that you can check if there are any other fees charged. If you see “miscellaneous fees” in the paperwork, be certain to ask the lender what these are.
You should also look for information about pre-payment penalties. These are fines for paying off your entire loan before your term ends. If there’s a chance to you can repay your debt earlier, then it’s best to avoid getting a cash loan with this penalty.
4. Sign the Dotted Line
If everything in the contract checks out, then all that’s left for you to do is to sign it or accept the agreement. After this, you may have to wait for a few more days for the lender to wire you your cash. Fintech companies, however, may deposit it to your account within the same day or the next.
Apply for Low-Cost Cash Loans Now
There you have it, your guide on how to apply for cash loans (and boost your chances of getting approved). The most important thing is to make sure your credit report doesn’t have any errors in it. After that, you just need to compare loan offers to find out which one comes with the lowest total cost.
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