There are two types of personal bank loans: unsecured and secured. Secured bank loans use collateral in order to help you receive lower fees, better repayment terms and a more beneficial interest rate. An unsecured loan is issued without collateral and at a much higher interest rate. Unsecured loans are monetary loans that are not secured against the borrower’s assets. The caliber of your financial situation will most likely determine which loan you will receive.
In most cases, you need good credit to get a bank loan. Although most financial institutions have ties to finance companies specializing in bad credit loan options, your banker needs to see a credit score of at least 650 on the scale of 300 to 850. You may even need a score as high as 720 to qualify for favorable rates and less paperwork.
To have a more positive lending experience with your bank, pull a copy of your credit report on a regular basis. If it shows incorrect information, fix it. When you know you have blemishes on your credit, prepare a document explaining any extenuating circumstances. For example, a low credit score due to unpaid medical bills isn’t always viewed the same as a low credit score for poor money management. Providing this information upfront saves time because the underwriter won’t have to ask for clarification about the situation.
Banks have some of the strictest guidelines to follow concerning collateral. Just because a used car qualifies for financing at the dealership doesn’t mean your bank can refinance the loan for you. Bank loans require vehicles to be no older than a certain age, usually five years, and have sufficient value to cover the loan plus their administrative costs. This means that a loan of $8,000 can require a vehicle value of $10,000 to allow the lender breathing room.
Before you visit your bank for a secured loan, investigate the value of your collateral. Remember to use the wholesale value rather than retail cost because banks sell cars and homes at auction in the event of repossession or foreclosure. If you feel your collateral justifies a higher loan amount than the wholesale value indicates, prepare to back up your claims with upgrade details or market comparisons.
-Assess your current financial situation by listing your assets, detailing your monthly income and deducting any liabilities, debts or expenses.
-Offering collateral could help you get a lower interest rate on your personal bank loan and in turn save you a great deal of money.
-Check over the loan documents once they’re prepared. The terms you and the lender agreed to should be represented honestly and in good faith in the loan documents. You can sign off on the loan if all items appear as discussed with the lender.
when applying for personal bank loans, do your research, know your options and take the time to go through all the terms and conditions you and your lender have discussed before signing any official documents.