How Does Getting A Personal Loan Work?

Whether you’re planning a home renovation, consolidating debt or covering an unexpected expense, a personal loan may be an option to help fund eligible expenses.

Applying for a personal loan involves several steps. Understanding the process before you apply can help you prepare your application.

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 worked out how much you need to borrow 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. 

Many lenders now offer an online application process, allowing supporting documents to be submitted electronically. 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, our team can answer questions about our loan products, interest rates and repayment options.

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. Checking your credit report before you apply can help you understand the information a lender may consider during their assessment. 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 and if your application is approved, 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 secured against an eligible registered vehicle

You get funds

If your application is approved and your loan settles, funds will be provided in accordance with your loan agreement. Depending on the loan purpose, payment may be made to your nominated bank account or directly to the supplier or seller.

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

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.