How to Apply for a Personal Loan

Whether it’s the wedding of your dreams, an urgent medical procedure, or the holiday of a lifetime, it’s no secret life can get a little expensive sometimes. You may find that a personal loan could be the financial solution you need. But applying for any kind of loan can be a confusing and daunting process. We’ll explain what a personal loan is, how they work, and provide a guide on how to apply for a personal loan.

Overview:

• What is a personal loan?
• How do personal loans work?
  • Secured vs unsecured loans
  • What is the highest amount I can borrow on a personal loan?
• How do you apply for a personal loan?

What is a personal loan?

A personal loan is a type of loan that allows you to borrow funds from a lender for a personal purpose. Personal loans are often offered by banks, credit unions, and online lenders, and can be used for expenses such as:

• Dental procedures
• Home renovation
• Medical expenses
• Wedding costs
• Holidays

How do personal loans work?

Typically, the personal loan amount is paid to the borrower in one lump sum. The borrower then repays the loan amount, with interest, over an agreed upon timeframe, also known as the ‘loan term’. Loan terms can usually range from 1 to 7 years with a fixed interest rate and fixed repayments that are weekly, fortnightly, or monthly.

Interest rates on personal loans can vary depending on the lender, the borrower’s credit history, and current market conditions, and whether the personal loan is secured or unsecured.

Secured vs unsecured loans

A secured personal loan requires you to provide an asset as collateral or security. This protects the lender should you be unable to repay the loan. Since lenders have this financial security in place, secured loans often have lower interest rates than that of unsecured loans.

Unsecured personal loans are not backed by collateral or security. In the event that you are unable to repay the loan, lenders may take legal action to recover the funds. Since lenders take on more risk by extending credit without collateral, they may charge higher interest rates to compensate for the increased risk.

What is the highest amount I can borrow on a personal loan?

How much you can borrow will depend on a number of factors including:

• Your creditworthiness
• Your ability to repay the loan
• Each individual lenders policies and requirements
• Whether the loan is secured or unsecured

Generally, personal loans can range from as little as $2000 up to $100,000 depending on the lender.

Not sure how much you can borrow? Contact our friendly team of experienced loan brokers today. We’ll assess your individual circumstances to provide you with the most accurate estimate on how much you can borrow.

How do you apply for a personal loan?

Applying for a personal loan can be a bit of a daunting process, especially if it’s your first time. To help guide you through the process, we’ve listed the steps you can follow when applying for a personal loan.

Step 1: Assess your financial situation

Before applying for any loan, you will need to assess your financial situation and determine:

• How much you will need to borrow
• How much you can comfortably afford to repay
• What current financial commitments you have that may be impacted by a loan

Step 2: Check your credit score

Once you have determind how much you would like to borrow and how much you can comfortably repay, it’s a good idea to then check your credit score. Your credit score plays a significant role in determining your eligibility for a loan and the interest rate you’ll receive. You can obtain a free credit report once every 3 months from each of the three major credit reporting agencies:

• illion – 132 333
• Equifax – 138 332
• Experian – 1300 783 684

Step 3: Research lenders

Explore different lenders and their loan offerings to find the best fit for your needs. Consider factors such as interest rates, fees, loan terms, and customer reviews. You can research lenders online, visit local banks or credit unions, or use loan comparison websites to compare multiple offers at once. You can also contact a loan broker, like our team at Oceania Finance, who can research on your behalf and negotiate better terms to suit your needs.

Step 4: Gather documentation

Prepare the necessary documents you’ll need to apply for a personal loan. This typically includes:

• Proof of identity (such as a driver’s license or passport)
• Proof of income (such as pay slips, group certificates, or tax returns)
• Other financial information, such as bank statements or information about any existing debts

Step 5: Submit an application

Once you’ve chosen a lender, you can begin the application process. You can usually apply for a personal loan online, over the phone, or in person at a branch location, depending on the lender’s preferences. The application will ask for personal information, financial details, and the amount you wish to borrow.

Step 6: Wait for approval

After submitting your application, the lender will review your information and assess your creditworthiness. This process may take a few days to a few weeks, depending on the lender’s policies and workload. Some lenders offer instant approval decisions, while others may require more time for underwriting.

Step 7: Review loan terms

If your application is approved, the lender will provide you with a loan offer detailing the terms and conditions of the loan, including the loan amount, interest rate, repayment term, monthly payment amount, and any fees associated with the loan. Review the offer carefully to ensure you understand the terms before accepting.

Step 8: Accept the loan

If you’re satisfied with the loan offer, you can accept it by signing the loan agreement. Make sure to read the agreement thoroughly and ask any questions you may have before signing. Once you accept the loan, the funds will be disbursed to your bank account, usually within a few business days.

Step 9: Repay the loan

After receiving the funds, you are responsible for making regular payments to repay the loan according to the terms of the agreement. Make sure to budget accordingly and make your payments on time to avoid late fees and negative impacts on your credit score.

Following these general steps can help ease the stress of applying for a personal loan and make the processes as smooth as possible.

Want to skip the steps? Contact a personal loan broker today!

A personal loan broker, like our team at Oceania Finance, can do the hard work for you. With access to a wide range of lenders, we’ll research and compare lenders to find the best solution for your needs. So if you’re ready to take the next step or just looking for some friendly advice, contact our team today.

FAQs

Why might someone be denied a loan?

There are several reasons why someone might be denied a loan. Lenders consider various factors when evaluating loan applications, and if any of these factors raise concerns, it could result in a denial. Some common reasons for loan denial include:

• Poor credit history or a limited credit history
• Insufficient income
• High debt-to-income ratio
• Recent credit or loan applications
• Errors on your credit report
• Unstable employment history
• Collateral issues

If you’re concerned about credit history or think you may be denied a loan, consider consulting a loan broker. Loan brokers can assess your financial situation and provide advice on your eligibility before you apply for a loan, without impacting your credit score. Contact our friendly team of experts today!

Do personal loan payments start immediately?

In most cases, yes, personal loan payments typically start immediately after the loan is disbursed to the borrower. Once you receive the funds, you are usually required to start making payments according to the terms of the loan agreement. These payments usually include both principal and interest and continue until the loan is fully paid off.

Do you need a deposit to get a personal loan?

In most cases, you do not need to provide a deposit, also known as a downpayment, to obtain a personal loan.