Applying for Personal Loans
Where to Find One
A personal loan is typically a loan to be used by an individual for his or her own personal use. In other words, it is not a business loan. Most personal loans are relatively small and unsecured. The banks I am familiar with have a limit of $5,000.00 before requesting collateral.
The purpose of a personal loan can be to purchase furniture or appliances, go on vacation or consolidate several small bills. The general rule is to finance the loan for one year for every thousand dollars borrowed. A one thousand dollar loan would be financed for twelve months; a four thousand dollar loan would typically be financed for forty eight months.
How to be Approved
Most individuals want to know if they will be approved if they apply for a personal loan. The best way to determine if you are a good candidate for an unsecured personal loan is to think about the Three C's of consumer credit.
The Three C's
All banks, large and small need to look at all Three C's to determine if you will be a good risk to the bank. The Three C's are Character, Credit and Capacity.
Character
Character is an indication of how stable you are. Typically
banks look at whether you own or rent your home. How often you move and how often
you change jobs. A general rule of thumb is two years at the present address and
two years on your job. Frequently moving addresses or jobs lowers your credibility
with a bank.
Credit
The second C is credit. Signing a completed
credit application allows the bank to pull your
credit history. This history tells the bank where you have been given credit in
the past and where you currently have credit. It will tell the bank how much you
owe, what your current monthly payments are, and if you make these payments on
time.
If all your payments are made on time, that tells the bank you would be a good credit risk. If you have a history of being 30, 60 or 90 days late with your payments, again your credit report is giving the bank an indication that you will not make your payment to them on time either.
Capacity
The
final C is capacity. Can you afford the payments on this loan? The bank will look
at your total monthly income and the total of all your current monthly payments,
add the payment of this new loan and come up with a debt-to-income ratio.
When the bank looks at all this information it will give them a picture of who you are, how much you owe and how you pay your bills. With all this information in their hands, the decision to approve or deny your loan is easy.
Get a Line
of Credit
Whether you want to simplify your finances, fix up your home, or pay for a dream vacation, Bank of America can help you achieve your goal with a line of credit that's right for you. It's fast, it's easy, and it's unsecured—so you don't have to use the equity in your home.
- Debt consolidation
- Home improvement
- Money for education
- Dream vacation
- Weddings
and special events
- Flexible term line of credit
- Revolving line of
credit
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