5 things to know about personal loans
Introduction
What is a personal loan? A personal loan is a lump sum of money that can be used for virtually anything: common reasons include paying off or consolidating debt, purchasing a vehicle, or major expenses like a wedding. Once you receive the funds, you must make monthly payments until the debt is paid off. A benefit of taking a personal loan versus another kind of loan is that the interest rate is fixed along with your repayment terms.
Here are 5 Sora “must knows” when considering a personal loan:
1. Credit Score: Your credit score has a huge say in the terms you are given when taking out a loan. It pays to make sure your score is in a good range. The ranges change from lender to lender, but typically “good” is considered 680+.
Between 6% and 8% you’re seeing a $1,416 difference in interest paid, and $2,818 between 6% and 10%. It pays to have good credit.
2. Income: If you’re employed you’ll need pay stubs or a W2 for your application. If you’re self-employed then you’ll need to supply 2 years of tax returns and bank statements that display your income.
3. Monthly payments: With your monthly debt payments (mortgage, auto, etc…), the lender will be able to make a debt-to-income ratio. The DTI ratio can tell lenders if you can afford to pay back the loan you’re requesting.
4. Joint loan: Applying for a joint loan with someone who has a better credit score can positively impact your chances of receiving a loan. They will have an equal responsibility in paying off the loan.
5. Assets: Lastly, you can use a secured loan. A secured loan is backed by an asset that you own. Using an owned asset to back a loan can help you qualify for a loan, but also comes with the risk of losing that asset if you are unable to pay off the loan.
Next Steps:
To apply for a personal loan, you’ll need to fill out the pre-approval application. This process may take anywhere from a few hours to a few days. Typically shopping around lenders is the most difficult and time consuming part of the process but when you use Sora, shopping around becomes pain-free.
