A personal loan can come in really handy when you are in need of a financial boost or some extra cash to help out with an emergency. Applying for a quick personal loan is actually very easy especially if you are already familiar with the relevant information and requirements as part of the application process. Let’s take a look at the process from start to finish and break down the requirements and considerations.
1. Decide On Your Goals
Purpose of The Loan
First and foremost – what do you intend to spend the money on? You can use the money to make a wide range of large purchases but this is not always a good idea. Some of the most common uses of personal loans today are:
- Paying medical expenses
- Paying for a vacation or holiday
- Financing a wedding
- Home improvement projects
- Debt consolidation
- Car purchase
Smaller purchases may not actually require you to take up a personal loan. Others sources of funds such as credit cards are more suitable for these kind of purchases.
Next, you need to settle on a specific amount to borrow. This depends on several factors such as:
- How much does the item/wedding/vacation cost?
- How big is the debt you are looking to consolidate?
- Will you use the loan to settle all your debt or will you complement the loan with your savings to settle the full amount?
- How much can you borrow and be able to repay comfortably?
Once you have considered the above factors, you can then move on to the numbers.
2. Calculate How Much You Can Afford To Borrow
Prior to shopping around for different types of loan products and applying for your preferred one, it is important to know how much you can afford to borrow.
You can determine this by calculating your income (salary or earnings) and your recurring expenses such as childcare, living expenses, bills, mortgage, rental payments etc.
You really need to be as accurate as possible when doing these calculations so that you can arrive at a realistic figure of how much money you can really afford to borrow. Later on, you will be asked to provide these estimates during the loan application process. If you are unable to provide this information, your loan application may be declined.
After arriving at a realistic estimate of how much you can borrow, you can then move on to calculate your installment amounts and the interest you will pay. This information will also help you to determine whether or not your loan amount is feasible.
3. Decide On The Right Loan
There are a variety of personal loan products out there today. Some of the main options you can expect are:
- Short Term Vs. Long Term
- Fixed Vs. Variable Interest Loans
Your decision on which type of loan to go for should be based on things like whether you will be comfortable with a variable rate or would rather stick with a fixed rate, how much money you need (amount), and the purpose of taking the loan.
It is advisable to talk to a loan expert if you are not sure about which loan product is best suited for you.
4. Submit An Application
Different lenders have different application submission procedures. Before you begin the application process, it is important that you gather all the details you will need so that the entire process will be quick and seamless. This will eliminate the need to update information or add extra details later on that will hinder the process.
Another important factor to consider is that all the loan applications you submit are included on your credit record so it is highly recommended that you don’t make too many simultaneous applications. If you have too many rejected applications, this will negatively impact your credit rating in the long run. Another thing is that you need to approve for a credit check to be done before your application to be considered.
Some of the information you may be required to provide on the application form include:
- Personal details of applicants (name, gender, address, contacts, date of birth etc.)
- Number of dependants for each applicant (people who financially depend on you, both at home and in other locations)
- Identification document (Medicare card and birth certificate, or passport or driver’s license)
- Employment details (current and previous employment)
- Income information (salary, investment earnings, rental earnings, child support, annuities/superannuation earnings). You will be required to provide both ‘gross’ and ‘net’ income details. Gross refers to all earnings you get pre-tax while net refers to earnings received after mandatory deductions are done.
- Information regarding recurrent expenses and general living costs such as fuel, groceries, utility bills, rent, insurance payments etc.
- Information on other loans and financial obligations you may have (mortgage, personal and business loans, credit card bills and other forms of credit)
- List of assets you own such as homes, cars, savings, real estate property, bonds etc.
It is advisable to provide all the necessary information in a thorough and detailed format. The lender is then able to make a much better assessment of your borrowing ability in order to provide a comfortable repayment plan.
Upon submission of your application, the lender will consider a wide range of criteria before giving an official response on loan approval.
5. Supporting Documents
It is possible to get a conditional loan approval which requires you to provide some supporting documents for your loan to be approved. The lender will communicate which documents are needed and how recent they should be.
Some of the documents you may be requested to submit are:
- Proof of earnings and income (government benefit statements, child support agreements, rental property statements, employment contracts, payslips and any other relevant payment receipt document etc).
- Proof of recurrent expenses and general living costs for applicants and dependants (loan account statements and a recent copy of your current account statement).
- Supporting documents for other applicants in the case of a joint application. All applicants must provide relevant and up to date information.
6. If approved, you are issued a loan contract that has all the relevant information pertaining to the loan such as the terms and conditions of the loan.
Upon receiving the contract, your loan is disbursed to your account and it may take at least a day for the funds to reflect in your account. The mode of delivery for the funds depends on the lender and the type of loan you applied for. For instance, funds can be sent electronically to your accounts, or via BPay or via cheque. Any special information regarding your loan will be highlighted in your loan contract.
You can consult with your lender to find out when you need to make your first loan payment as well as how often you need to make the payments (weekly/bi-weekly/monthly/quarterly). Many loan products also have provision for making extra payments when you find yourself with extra money. However, it is important to find out if there are any extra charges or fees incurred because of making extra payments or early loan repayment.
Are you good to go?
LoanOne is here to help. LoanOne is one of the fastest growing financial companies in Australia. We offer both personal and business loans with competitive rates to different industries. Our loans are fast, flexible and can be tailored to both your personal or business needs. Please click here to get the loan application process started now!