How does getting a personal loan work?

Are you looking to bridge the gap in funds for a holiday, special event, home renovations, or something else? A personal loan could be the best option for you to get funds quickly.

It’s a good idea to get to know how borrowing works before you start applying, so you don’t run into any surprises down the track.

So, here’s the basic rundown:

You apply with a lender for a certain amount

All lenders will have some kind of application process to get your basic details to see whether you’re eligible for a loan. You would expect to be handing over identification details like your name, address and date of birth, as well as things like bank statements, living expenses and payslips. A lot of this is automated now, so it’s a relatively fast and pain free process. You should also expect to tell the lender why you want the loan and how much you’d like to borrow. Be aware that based on your financial situation, the lender may offer you less than you asked for and in some cases, more.

Your credit score is checked

When you make a loan application, the lender will run a credit check. This will show your credit history and may impact how much you can borrow or your eligibility. Most lenders will run a credit check during the application process, so it’s best to avoid making too many enquiries at once as it can affect your credit score.

You get a contract

If you’ve been made an offer by the lender, to seal the deal you’ll need to sign a contract. This will contain a whole host of important details you need to check out, such as:

  • Loan amount
  • Loan term
  • Repayment amount and schedule
  • Any fees and charges, including defaults and early pay-outs
  • The interest rate

You’ll also see the total cost of credit, which is the amount you borrowed plus the amount of fees and interest you’ll pay over the life of the loan. This is how borrowing credit works – you enter into a contract with the lender to say that you’ll not only pay back the amount you borrowed on time but also the interest and fees it incurs over the agreed upon period.

You get funds

Providing all goes well and you return your signed contract, your funds will be released into your nominated bank account, and your repayment schedule starts.

You’re now on your way to kicking that goal with the help of a personal loan. Congrats!

When life gives you lemons, or you just need a boost towards your goal, applying with Rapid Loans is faster than making lemonade. Apply online in minutes here.

This article is an opinion piece and not intended as a sole source of advice.