Getting a loan is a tiring process. Talking to tons of different lenders, checking for rates and whatnot. Although, it might take days but it pays off when you find your right loan terms. Knowing how personal loans work and what you are required to do before you start applying for a loan makes things easy. Here’s some information about personal loans that might come handy while you consider applying for one.
A personal loan is a loan given to the borrower without any requirements dictating how to use the money. This means you can use your loan for whatever you want, unlike a mortgage or an auto loan, which have to be used to finance your house or car, respectively.
How Do Personal Loan Works?
Once you’re approved for a personal loan, the lender gives you an offer that you can accept or decline. The offer should include everything you need to know, like the terms, the interest rate, and any fees.
If you accept, the lender sends funds directly to your bank account. Most lenders pay you within 14 days, and may offer same-day or next-day funding.
Then you make repayments, which usually start within 30 days of when you receive the loan. In most cases you’ll pay the same amount each month. Early payments tend to go towards interest; over time, more of your payments will go towards the loan principal.
Documents Required For Personal Loans
Each loan provider is different and may ask for different documents as you apply for a loan. On the loan application itself, you’ll be asked for your Social Security number, address, and your income. You will also normally need at least three documents to apply for a loan:
Proof of identity, such as a driver’s licence, passport, or state-issued ID card.
Proof of your income. You may need to provide pay stubs, tax returns, W-2s and 1099s, bank statements, or your employer’s contact information. If you are self-employed, the loan provider may ask for bank statements, 1099s, or tax returns.
Proof of address. You can use a utility bill or your rental agreement for this. If you don’t have either, you might be able to use a mortgage statement, voter registration card, property tax receipt, or bank or credit card statement.
In addition to this basic information, your loan provider might ask you to provide the details for either a co-signer or the purpose of the loan.