Banks are far more reluctant to loan you their money these days than they once were, so before you even apply for a personal bank loan it pays to obtain a copy of your credit score. You won’t need to present this to the bank as they will do their own credit check on you to determine if you are a good candidate for a personal loan, or a high risk customer who is more likely to be shown the door.
Being forearmed with your credit score allows you to try to improve it before application if its not exactly top notch, and at least be pre prepared for the level of interest rates which will be offered specifically to you.
It makes good sense to compile as many documents together as you can when you make your loan application. The bank will require proof of your address, your social security number, and proof of at least the last three months of your earnings. You should provide employer pay stubs to show proof of your income, as well as bank statements if it is paid directly into your bank account. Some banks may also require the previous year’s tax return so take it along with you. The bank may also request a list of your assets and liabilities such as current debt levels.
You should know in advance if you are going to request a secured loan or an unsecured loan. Banks prefer the former as you provide them with collateral against default, and in turn you will secure a lower interest rate. On the downside you are putting your collateral at risk. If you opt for an unsecured loan the bank may still only offer you a secured loan anyway. Unsecured loans are considered higher risk so the interest rates are higher.
Collateral which you may consider offering for a secured loan can include an item you are about to purchase with the loan, such as a vehicle. Alternatively banks are very keen on taking your home as collateral, particularly on high value loans. You could also offer investments and stocks as collateral. Have all the necessary papers on you which show ownership of offered collateral, which you will need to assign to the bank to obtain a secured loan.
In cases where the applicant is young or has not yet established much of a credit history a co-signer may be required to act as guarantor. This may result in a lower interest rate being offered but puts the co-signers credit worthiness at risk if the loan payments are not made in a timely fashion.
Finally research the best rates and terms before you apply for a personal bank loan, and beware of any penalty clauses. Read the agreement thoroughly before you sign and be sure to make all the payments on time.