A personal loan can help you push through tough financial times and whenever you're strapped in cash, enabling you to pay for emergencies, necessary repairs, debt consolidation, or other larger purchases. But before you move forward with the process, it's important to pre-qualify for a personal loan to avoid hurting your credit score down the line.
Why Do You Need to Prequalify for a Personal Loan?
There are a few different reasons why pre-qualification is a smart move. First, if you apply for a loan without pre-qualifying first, the lender will run a hard credit check. This can lead to a couple of different downsides.
For one, the hard inquiry will lower your average credit score, which can negatively impact your credit. The lender may also be unwilling to issue you a loan, opting to give your application to someone with a higher credit score.
To avoid these downsides, we recommend you pre-qualify with a loan officer before applying. This way, you'll have an idea of what your personal loan interest rate will be and whether you'll be approved.
You can also ask the loan officer whether they'll run a hard credit inquiry, which may be a better option than being declined.
Steps for a Personal Loan Pre-Qualification
Step #1: Fill Out the Pre-Qualification Form
The pre-qualification process is pretty straightforward. Most lenders will have a form you need to fill out which will include your name, address, income, length of employment, and other critical information such as the following:
Social Security number;
Savings, retirement, or investment accounts; and
The desired loan amount and repayment term.
Step #2: Get a Soft Credit Check
Pre-qualification is just that, a pre-qualification. This means that you don't need a hard credit check to get pre-approved for a personal loan. But, if for some reason you want to shop around for a loan, you'll want to get a soft credit check first.
If you're shopping around for a loan, you can use a soft credit check to give you an idea of what your interest rate will be. This way, you'll have more information and can do some comparison shopping before finalizing your decision.
Step #3: Improve Your Credit Score and Get Approved
It's important to note that if you're planning to accept a loan and are planning to purchase a car or something similar, your credit score can impact whether or not you're approved.
If you have a low credit score, you may need to improve it before you can be approved. To improve your credit score, you'll need to make on-time payments and pay off existing debt. A lack of credit history may also be a deterrent, so it's important to build a track record before applying for a personal loan.
Step #4: Apply for a Personal Loan
Once you've applied for a pre-qualification and received a letter of approval, you can go ahead and schedule your loan appointment with a loan officer at the lender's office. If you've pre-qualified, the appointment will be a quick one. If you've been approved, the loan officer will go over the loan contract and sign you up for the loan. You can expect to have the funds available to you within a few days.
The Bottom Line: Why It's Always Better to Get a Pre-Qualification Before Applying for a Loan
While you can get approved for a personal loan without pre-qualifying, it's highly recommended that you do so before applying. If you're facing financial trouble, it's also a good idea to speak with a financial advisor regarding other options that can help you get out of debt. They may be able to assist you in negotiating lower interest rates with your creditors.
Are You Looking for the Best Installment Loans in Memphis, TN?
If you're looking for a finance company that offers fantastic deals when it comes to personal loans in Memphis, you've come to the right place. Shelby Finance Company can ease your financial woes by offering a variety of personal loan sizes, so you can find the best deal that suits your needs.
Contact us today at 901-542-8212 to see how we can help you obtain an affordable payment plan with no hidden fees to worry about!