Home Philatelic investment What to consider when applying for a personal loan

What to consider when applying for a personal loan


Are you eligible for a personal loan? Learn more about what you need to get the best rates.

Personal loans can be a great option for borrowing money when you are working on debt consolidation or to cover a large expense. They generally have a lower interest rate than credit cards and offer the convenience of fixed monthly payments.

If you want to get a personal loan, understand how you qualify for a loan and how best to get it, the lowest rates could save you time and money.

Research is essential when choosing a personal loan – and knowing the different types of personal loans is important. The five to choose from are unsecured loans, secured loans, co-signed loans, debt consolidation loans, and a personal line of credit.

Be sure to visit Credible to compare rates and lenders, and consider the following factors during the personal loan application process in order to get loan approval.

Your credit rating

One of the first things a lender will look at after completing a loan application is your credit score. Your credit score is a three-digit number that represents your risk to lenders. If you have a bad credit rating, a lender will see you as more likely to default or miss payments.

Although credit scores may vary slightly depending on the rating company, having a basic idea of ​​a good credit score can help you set goals.

the FICO credit score metric is:

  • Poor: 300-579
  • Fair: 580-669
  • Good: 670-739
  • Very good: 740-799
  • Exceptional: 800-850

If your score is low or below an acceptable credit score, you may not be eligible for a personal loan and you should work on improving your credit score. Aim for the great and the great to get the best rates possible, and work on building credit to avoid bad credit or even fair credit.


You can visit Credible to check your credit score without affecting it negatively.

Your debt-to-income ratio

A lender wants to know that you can afford monthly payments on your personal loan. In addition to your credit score, they will look at your debt-to-income ratio (DTI). Your DTI is the percentage of debt you have over your gross monthly income.

For example, if you earn $ 5,000 per month and have a mortgage, car payment, and credit card payment totaling $ 2,000, your DTI would be 40% (your debt divided by your gross income). Ideally, your DTI should be 43% or less, depending on the Consumer Financial Protection Bureau.

If your DTI is too high, a lender may offer a lower loan amount or deny your request.

Estimated APR

The APR (Annual Percentage Rate) is a number that shows you how much your lender charges for the loan. Your APR will include your interest rate plus fees. Your lender spreads your fees and interest, plus the loan principal over 12 months.

The APR can help you determine how much of your monthly payment is used to pay off the balance and how much is used to pay fees and interest. A lower APR means you’ll pay less over the life of the loan.

Visit Credible to see your estimated personal loan rates with soft credit.

Loan amount and term

When applying for a personal loan, take a few minutes to decide how much money you need to borrow. Borrow only what you need to keep your loan costs low.


Your lender will often offer several repayment terms. A longer repayment term will result in lower monthly payments, but you will pay more interest. A shorter repayment term will result in a higher monthly payment, but you’ll save on the interest you pay.

Typically, personal loans offer between 12 and 60 months to pay off your loan.

Monthly payments

How much can you afford to repay each month? If you can figure out how much you can afford to set aside each month to pay off your personal loan, you’ll have a better idea of ​​how much you can afford to borrow.

Your monthly payment will include principal and interest (plus fees if you don’t pay them upfront). Prepare before you apply. You can use a personal loan calculator to estimate your monthly payments.

Guarantee required

If your credit score is less than ideal, you may not qualify for a traditional personal loan.

Although most personal loans are unsecured (no collateral is required), you may need to go for a secured loan. A secured personal loan provides cash, but you have to borrow against your personal assets. Other examples of secured loans are auto loans and home loans, while student loans are unsecured loans. Commercial loans, on the other hand, can be secured or unsecured.

Typically, lenders will use property or vehicles as collateral. If you don’t make your payments, they can take your property to cover their loss.

Be sure to do your research when choosing a personal loan. A little time can help you get the money you need at the lowest possible rate. Understanding how to qualify before submitting your application can help you prepare so that you can take advantage of low interest rates. Be sure to visit Credible to connect with experienced loan officers and get your personal loan questions answered.


Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at moneyexpert@credible.com and your question could be answered by Credible in our Money Expert column.