How Does Getting A Personal Loan Work?

Whether you’re planning a home renovation, consolidating debt or covering an unexpected expense, a personal loan can help you access the funds you need without waiting years to save for them.

Applying for a personal loan is usually much more straightforward than many people expect. 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.

Here’s what typically happens when you apply for a personal loan.

You apply with a lender for a certain amount

Before getting into the application process, it’s a good idea to have a look at your financial situation. You’ll want to look over how much you have saved, how much you want to borrow, and then balance that out to see if you’ll be able to make repayments for the sum you’re asking for from a lender. Being able to clearly present your financial situation is an important part of the application process. Having a realistic idea of how much you need to borrow can also help you complete your application.

Once you’ve settled on the amount you need for a trip, some work done on your home, or that dental procedure you’ve been meaning to get done, you’ll need some paperwork. You should be able to show things like identification details such as 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. Depending on your financial situation and the lender’s assessment, you may be offered a lower loan amount than you originally requested. When you’re going through the application process with Rapid, you’ll be able to consult with our friendly team who can give you additional context like repayment periods and interest rates too. 

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. Having a look at your credit score before you apply is quick, easy, and a good thing to do. It doesn’t take long and can be completed online before you get into the application process. Having an average score doesn’t necessarily mean you won’t get approved, but knowing all the information before you start will give you the context you need. 

You get a contract

Once all of your information has been reviewed, if you’re successful, you’ll then be made an offer by the lender, and 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. If you accept the loan offer, you’ll enter into a credit contract that sets out your repayment obligations, interest, fees and other important terms and conditions. Secured loans, like those offered by Rapid, are borrowed against a registered asset like your car, so it’s important to keep on track with repayments. 

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. Depending on your loan contract, you may be able to make additional repayments or repay your loan early. Check your loan agreement for the terms that apply.

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

If you’re considering a personal loan, you can learn more about the application process or apply online with Rapid Loans. Apply online in minutes here.

This article is general information only and does not constitute financial or credit advice. It does not take into account your personal objectives, financial situation or needs. When you apply for a loan with Rapid Loans, your application will be assessed against our credit eligibility criteria. All applications are subject to approval. Terms and conditions, fees and charges apply.