What do you need to take out a loan? If it’s your first time applying for a personal loan, you may be intimidated by the details. But it’s not as daunting as you might think.
Use this checklist to help you prepare what you need for a loan.
Personal Loans 101
Nearly 40 million Americans hold personal loan debt. It’s also the type of debt that is growing most rapidly, according to Experian — one of the four main credit bureaus in the country.
Personal loans usually last for a short period—between two to five years—and come in two main forms: secured and unsecured. Secured personal loans require collateral, like a savings account that backs up your ability to pay the loan, while unsecured personal loans do not.
You can apply for a personal loan from your bank or other reputable lenders. In fact, it’s more convenient than ever to compare personal loan rates online to choose a lender that works for you. However, you will need to provide some basic identification and financial information.
Essential Personal Loan Documents
What do you need to apply for a personal loan? The type of information you need to provide when applying for a loan will depend on your lender and the type of personal loan. But here are a few common items that you’ll probably need to provide.
Identification
Lenders need to verify your identity, so be prepared to provide supporting documentation. This could include one of a combination of items like your driver’s license or state ID, passport, and social security card.
Proof of Address
You may also need to provide a lender with your proof of residence. Documents such as a lease, voter registration card, or utility bills could suffice.
Income Information
Your lender may ask you for supporting financial information such as bank statements, pay stubs, or tax returns if you’re self-employed. If you can’t provide proof of income, there are other borrowing options if you have no employment verification.
What Do You Need to Take Out a Loan? Other Considerations
Before you apply for a personal loan, it’s important to think through the details
Credit Standing
Know what your credit score is before you apply. This will help you ensure you meet the requirements for a personal loan.
If you apply without knowing your credit situation, this could harm your credit score. Any application for credit requires a hard inquiry. And hard inquiries generally lower your credit score and remain on your credit report for a couple of years.
Compare Loan Offers
Make sure you shop around for the best loans for your purposes, whether it’s for debt consolidation or major home repair. Applying for pre-qualification can help you compare and contrast and avoid a major hit on your credit score.
Get More Guidance
Do you feel more equipped to answer the question of “What do you need to take out a loan?” We hope you’re more confident about doing what’s best for your needs.
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