How to Apply for a Personal Bank Loan

Anyone over eighteen years old can apply for a bank loan, but that does not necessarily mean that they are forthcoming. Decisions may take days or weeks to be made, and the decision will be primarily influenced by your credit score. Banks have tightened up on their lending procedures and it is much harder now for those with less than stellar credit to obtain a personal bank loan.

Applying for a personal bank loan is an easy procedure, but rates and fees can vary widely between banks. Thus it pays to do a full online comparison shop first to search out the best deals to suit you. When you start to look around know in advance what your credit score is so you can pinpoint the loans you may be eligible for. Naturally if you have an excellent credit score and a steady income your chances of obtaining a personal bank loan will be much higher.

As you comparison shop consider the type of interest rate which applies, and whether it is a fixed rate of variable. Fixed rates offer more security as the monthly instalments will remain the same for the full term of the loan, whilst variable ones will often go up and down, making it more difficult to factor the exact monthly repayments into your budget. The interest rate applied to the loan should be of particular importance, though very much dependant on your credit score.

In addition to the interest rate you should pay attention to any initial fees which the loan carries, and any penalty fees applied to either over payments or early redemption of the loan. Avoid these at all costs as you may have the opportunity to pay the loan off in full before the length of the loan expires.

There are two key types of personal bank loans available: secured and unsecured. Secured bank loans require you to put collateral up to secure the loan, and banks are very keen on your home as security if you own one. Wherever possible avoid giving security against the loan as you are putting your collateral at risk, even though the interest rates on a secured loan will be lower than on an unsecured loan. Unsecured personal loans require no collateral and thus carry higher interest rates.

Once you have comparison shopped for your loan and made a decision as to which one to apply for, contact the personal loan lending officer at your chosen institution. You will need to provide proof of employment and income, and papers pertaining to any collateral you offer. If you are relatively new to credit without an established credit history the bank may well ask you to provide a guarantor to co-sign the loan.

In addition some banks will want to know what purpose you require a loan for, as they can be issued for all kinds of things such as car purchases, vacations, debt consolidation and home improvements. Requesting a loan to feed your gambling or alcohol addiction is likely to be declined.

With the high interest rates which personal loans carry, ensure you really need one before applying for one. It may be much more prudent to save up the amount you intend to borrow. Although this will delay your purchase it brings the advantage of not paying interest to the bank, and the bank can instead pay you interest as you save.