How to Apply For a Loan

When you need extra money to cover your expenses or pay for a large purchase upfront, you might consider a personal loan. If that’s an option you're considering, then it’s a good idea to know how to do it properly. In this article, we’ll offer some advice on how to apply for a loan and share a few tips on how to choose the right type of loan for your particular needs.

What you should know if you need to apply for a loan

If you decide to apply for a loan, there are a few things you need to know. First, you should explore all your options. For example, you may be considering a personal loan, but did you know there are several different types?

The various types of personal loans each have pros and cons, and their respective advantages and disadvantages can be very different. Even among loans of the same type, the terms can differ from lender to lender.

Types of personal loans

Personal loans fall into two categories: secured and unsecured.

Secured loans require you to put something up to use as collateral in case you default on the loan. With this type of loan, you surrender the property or asset if you fail to make your payments.

Unsecured loans, on the other hand, do not require collateral. Typically, you’re lent money on the basis of your credit score and income. Because there’s no collateral to guarantee an unsecured personal loan, the amount you can borrow is often lower and the interest rate can be higher than what you would get with a secured loan.

Personal loans can also be divided by the repayment term. There are two types. One is a personal installment loan. This arrangement requires small regular payments (usually monthly) over an agreed length of time.

The other type is a short-term loan or a payday loan, which requires a single lump-sum repayment. You generally have one month to repay these types of loans, but that period could be shorter or longer depending on your lender.

Credit scores and interest rates

When applying for a loan, your credit score can play an important role in terms of the type of personal loan you can get and the interest rates you’ll be offered. If you have a good credit score, you’ll generally be able to get a personal loan with a lower annual percentage rate (APR). However, if your credit score isn’t great, you may be offered loans with higher APRs. It depends on your lender and your credit profile.

The length of your loan also factors into your APR. Longer-length installment loans tend to have lower APRs than shorter-term installment loans. However, with installment loans, you’ll be making many more interest payments, which can add up over time. Conversely, single-payment short-term loans tend to have higher interest rates, but as the name implies you’ll only be making one payment.

Applying for a loan: loan application process explained

To apply for a personal loan with a traditional lender like a bank, you will generally be asked to provide proof of income. Your lender will also run your credit score and might look at your credit report. This information is often provided in-person, but you may be able to submit an application online depending on your bank.

You’ll usually get a decision in a couple of days and your money shortly after that, but the process length can vary depending on your lender.

Online loans tend to be processed a little faster than those provided by traditional lenders. Plus, online loan providers usually offer convenient online applications. However, the application process will, again, depend on the lender.

How to apply for bad credit loans

Although LendUp does not offer loans in every state, in states where LendUp does offer loans we offer short-term personal loans that are a better alternative to payday loans, even if you have bad credit. Decisions can be instant and you could receive your money in as little as a single business day.

While we do check your credit, we don’t do a hard credit check with the traditional credit bureaus so your application will not impact your credit score. Plus, we know that you are more than your credit report, so you’re welcome to apply, even if you have bad credit.

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