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 of time—between two to five years—and come in two main forms: secured and unsecured. Secured personal loans require some kind of collateral like a savings account that back up your ability to pay back the loan. Unsecured personal loans don’t require any backing by an asset.
You can apply for a personal loan from your bank or other reputable lenders. It’s also more convenient than ever to apply for a loan online. But you do need to be prepared 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.
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.
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
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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