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How to Apply For a Personal Loan in 5 Steps

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Applying for a personal loan can be both exciting and nerve-wracking. You may be looking to make a purchase or consolidate your debt. But first, you have to go through the personal loan application process. Luckily, getting a personal loan is a fairly straightforward process.

1. Check your credit score and credit reports

It’s critical to check your credit score before you start to search for a personal loan. Your credit score will, in part, determine whether you are able to secure a loan. Often, it will impact what type of interest rate and repayment terms your lender offers you.

You can check your credit score for free from any number of sources. LendingTree, the parent company of MagnifyMoney, offers a free credit monitoring service that will show you your VantageScore. With some banking institutions, you can receive your free credit score by checking your bank or credit card statement.

When you check your score, it’s good to know exactly where you stand. If it turns out that your score is lower than you thought, you can work on some measures to increase your score before applying for a loan. Let’s take a look at the range of credit scores you might have and what those numbers mean. Here are the FICO score ranges:

  • 800-850: Exceptional
  • 740-799: Very good
  • 670-739: Good
  • 580-669: Fair
  • 300-579: Very poor

Typically, most lenders require that you have a minimum credit score to be approved for a loan. But different lenders set their own requirements. The higher your score, the easier it can be to qualify for a loan.

Although consumers with low scores can still qualify for a loan, you can take extra measures to ensure you are approved for a loan or get favorable terms. You might consider:

Keep in mind that if your credit score isn’t in the higher tiers, you’ll need to carefully weigh the pros and cons of pursuing a personal loan. Taking on too much debt could potentially impact your credit score, as would being unable to repay your personal loan.

Improving your credit score

Your credit score is reflective of information found on your credit report. Each of the three major credit bureaus — Equifax, TransUnion and Experian — maintain a credit report that outlines your outstanding debts, your payment history and more. If you have a low credit score, requesting your credit report could be your first step to increasing your score and qualifying for more competitive loan terms.

You can request a free copy of your credit reports once every 12 months from each of the credit bureaus by visiting AnnualCreditReport.com. Carefully review your reports and dispute any errors you find.

If there are no errors on your reports but you have a low credit score, you will need to develop healthy financial habits to raise your score over time.

After reviewing your credit reports and credit scores, you can begin researching lenders.

2. Research and compare lenders

Just as credit requirements may vary, different lenders may offer different interest rates and term lengths on their loans. It’s wise to check different lenders to get an idea of which will best meet your needs.

You can find personal loans from banks, credit unions and online lenders. If you’re not sure where to start, you can use MagnifyMoney’s personal loan marketplace. There, you’ll enter your desired loan amount, credit score range and ZIP code before reviewing lenders.

No matter how you seek out lenders, your goal should be to find a lender that offers:

  • Reasonable interest rates
  • Loan terms that suit your financial needs
  • Few limitations on repayment, such as no prepayment penalties
  • No or few hidden fees

Just because one offer from a lender looks good doesn’t mean you shouldn’t consider other lenders. You’ll want to choose a few of your favorites. In this next step, you’ll apply for preapprovals to get a better idea of what loan terms each of these lenders will offer you. Use our table below to compare personal loan offers to find the best option for your needs!



Compare Personal Loans

3. Go through the preapproval process

To find out which lender has the best offer, you can get preapproved for a loan through different institutions. When you apply for loan preapproval, you may need the following documents and pieces of information:

  • Total amount you want to borrow
  • What your purpose for borrowing is
  • Your name
  • Your home address
  • Your total annual income

To get preapproved, you may not need documents such as tax returns to prove your income, but you will need to be prepared to offer these when you officially apply for your loan.

Next, the lender will perform a soft credit check to determine what type of offer it can give you. A soft check is where a bank or company can access your credit report and score, but it doesn’t affect your credit as a hard inquiry would.

After submitting your application, you’ll receive word whether you’re preapproved. Once you have your preapproval offer, you’ll see the loan amount for which you’re preapproved, plus your rate. This amount and rate aren’t a sure thing – it’s just an estimate provided from the lender based on high-level financial information.

When you apply for your loan, the lender will do a more in-depth look at your finances and consider your ability to repay the loan. This could affect the rate and amount for which you qualify. But a preapproval offer allows you to better compare different lenders to determine which is the best fit for you.

In this step, you’ll want to dig into each of the lenders who have preapproved you. Consider checking each lender for the following:

  • Poor reviews: If you haven’t already checked customer reviews, now’s the time. Knowing how a lender treats its customers could help you avoid getting stuck with a bad lender for several years.
  • Hidden fees: Dig into the fine print with each lender. Keep an eye out for hidden fees.
  • Prepayment penalties: If you want to pay off your loan early to get out of debt, that should be a good thing. Having to pay a penalty for not paying the loan for the full length of your term is something you should avoid.
  • Pre-computed interest. In a nutshell, this means that you end up paying more interest on the front end of your loan, which could result in you overpaying over the life of your loan term (even if it’s paid off early). This is a common personal loan trap.

4. Finalize your application

When you decide on an offer that works for you and your unique financial situation, you’re ready to finalize your application. Although you’ve already received preapproval, you’ll still need to fill out your official application for final approval.

This typically only requires a few additional steps:

  • Proving your identity, such as with a driver’s license or passport
  • Verifying your address through a copy of your lease or a utility bill
  • Proving that you have steady income through bank statements, an offer letter or contract from your employer

Remember: If you’re not happy with the loan offer you receive, you can always negotiate with your lender. This is a particularly viable option if you’ve already built up a relationship with your bank or local credit union and are seeking a loan from it. Many lenders will have some wiggle room on their offer, especially if you’re able to point to another preapproved loan offer you received with better interest rates or repayment terms. Once an institution has all the details it needs, it should only take a couple of days for it to process its decision, and another week to send you a notification by mail (if applicable). Funds can be available as soon as the next business day.

5. Know what you’re getting into

Regardless of what type of loan you end up selecting, it’s important to read and understand the fine print. No loan is going to be perfect in every way, and weeding through the final loan offer you receive can set you up for future success.

For example, knowing whether your lender takes automatic withdrawals is important information as you build a new monthly budget that includes your loan. It’s also important to fully understand the expected monthly payment on your new personal loan, and whether you can pay off your loan early without penalty.

Applying for a personal loan can be daunting. Taking on debt in any capacity can be a financial risk, and you need to be prepared for the potential consequences. After you receive your loan funds, you should work diligently to pay them back. To do this, you can set up automatic loan payments and regularly pay extra toward your loan when possible to speed up your repayment process.

If your budget doesn’t support additional payments on a consistent schedule, you might consider dedicating yourself to putting any windfall toward your loan. This would include a quarterly bonus, money you receive as birthday or holiday gifts or any other funds you receive that weren’t already included in your annual or monthly budget.

Finally, think about why you took out the loan in the first place. Is there a way to avoid accumulating debt like this in the future? It may make sense to add extra savings into your budget once this loan is paid off to put money toward future big-ticket financial goals. It would also help to avoid taking on additional debt while you work to pay down your existing personal loan.

Final thoughts

Taking out a personal loan can be stressful, but the application process doesn’t have to be. Organizing your documents ahead of time, checking your credit score and doing your research on different lenders can help you ensure that you’re getting the best possible loan available for your unique needs and financial circumstances.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dave Grant
Dave Grant |

Dave Grant is a writer at MagnifyMoney. You can email Dave at [email protected]

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Align Income Share Agreement Review

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

If you need money — such as to cover an emergency expense or to consolidate debt — but you’re worried about high-interest rates you might face with a personal loan, there is an alternative funding option you may consider: an income-share agreement (ISA).

An ISA doesn’t come with a set interest rate. Instead, you pay a percentage of your yearly income every year for a set number of years, paying back what you originally borrowed plus more.

Chicago-based Align Income Share Funding is one source of this type of agreement. The company has been providing ISAs since its founding in 2011. In this review, we’ll explain how Align’s ISA works and whether it might be a good fit for you.

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Align income share agreement details
 

Fees and penalties

  • Terms: Align states that its income-share agreement runs from 24 to 60 months. However, that may depend on your location.
  • Borrowing cost: Align doesn’t charge traditional interest rates on its loans. Instead, it charges a percentage of your income, no more than 10.00%. Say you make $40,000 a year. You might agree to spend 3% of your income each year to repay your loan, or $1,200. If you borrow $4,000 and you sign an agreement to pay back your loan over four years, you’d end up paying $4,800, or $800 more than what you initially borrowed.
  • Borrowing limits: Align will loan you a maximum of $12,500.
  • Time to funding: Align says that you once you sign your contract, it can deposit funds in your bank account in as little as one business day.
  • Hard pull or soft pull? Soft Pull. You can get a quote for an ISA on Align’s website and it will not impact your credit score.
  • Origination fee: Align does not charge origination fees.
  • Prepayment fee: Align also does not charge a prepayment fee. However, there is a cost for getting out of your agreement early.

There are no limits on how you can use your funds from an Align ISA. You can use the money for everything from consolidating high interest credit card debt to paying for home repairs or a dream vacation.

Align is flexible, too, when it comes to determining your income. As the company’s website states, anything listed in box No. 1 of your annual W-2 form can be considered income.

Eligibility requirements

  • Minimum credit score: Not specified.
  • Minimum credit history: Not specified.
  • Maximum debt-to-income ratio: Not specified.

Align doesn’t say much about the minimum credit scores or debt-to-income ratio you will need to qualify for an income-share contract. Their website, however, specifies that they’ll consider your income, creditworthiness, job, and location when determining whether to approve your request for funds.

How Align’s income-share agreement works

This yearly percentage is broken up into monthly payments. Say you borrow $8,000 from Align and you earn $30,000 a year. If you agree to pay back your ISA at 10% of your yearly salary for three years, you’d pay Align $3,000 a year, at $250 a month. After the three-year repayment period has ended, you’d end up paying a total of $9,000, or $1,000 more than you borrowed.

When you set up your contract, you pick a date on which you want to pay each month. Align then automatically deducts that amount from your checking account.

As your income changes, so can your monthly payment. If your income goes up, the percentage you contribute will remain the same. But because your income is increasing, the overall amount you pay will jump, too.

It works the other way, too. Align says that if your income falls, you will pay less. If you become unemployed and you have no income, your monthly payment could potentially fall to $0. If you become unemployed, you will have to submit proof that you are not working, such as a notice from your former employer or documents showing you are receiving unemployment benefits.

Applying for an income-share agreement from Align

Applying for an ISA from Align is a simple process. Just click on the “Apply Now” button on the company’s homepage. Once you do, you’ll be asked to provide your name, date of birth, Social Security number, email address, physical address and phone number.

Align will also ask for your gross yearly income, your income source and the industry in which you work. You’ll also need to provide your education level, estimated credit score, the amount you’d like to borrow and what you want the money for.

After filling in this information, you will then submit your application for an online quote. If you are interested, you can contact Align to speak with a representative who will verify your income, job status and credit. Once this is done, Align will make you an official offer stating how much it is willing to lend you and at what percentage of your yearly income. Align will also state how many months you will make payments, and how much you will pay each month and each year to pay off the money you received.

If you like the offer, you will sign your contract. Align will then deposit your funds into your bank account in as little as one business day.

Pros and cons of an Align income share agreement

Pros:

Cons:

  • No interest rates: Align doesn’t charge interest rates for its loans. However, you will have to pay a percentage of your annual income for a set number of months to pay back your loan.
  • No origination fees: Applying for a loan at Align is free. The company also doesn’t charge you for the work involved in originating your loan.
  • Protection if you lose your job: How much you pay is based on how much you earn, so you won’t have to make any payments if you lose your job and your income.
  • Applying is fast: You won’t have to meet in person with a lender to get your money. You can start the process online. You will have to speak with a representative to verify your financial information.
  • Monthly payment may change: Your monthly payment can vary because Align charges you a percentage of your gross income to lend you money. If your income fluctuates, your monthly payment will, too. This can be challenging when you are making a household budget.
  • Not everyone is guaranteed an ISA: Align looks at your credit score, income and employment status when determining who qualifies for funds. There is no guarantee of approval.
  • Paying out of your contract may be pricey: You can end your contract with Align before your term ends. This will cost you, though. Align lists in your contract the amount of money you’d have to pay to get out of your ISA early.

Who’s the best fit for Align Income Share Funding?

An Align ISA can work for people who aren’t afraid of a little uncertainty and are worried about high interest rates. Because Align charges a percentage of your income, your monthly payments can increase or decrease. If you don’t mind this uncertainty, an Align ISA might be a good choice.

This type of agreement might work, too, if you have a relatively low income. But if your income is high, or if you expect it to rise in the near future, an ISA might not be a good fit — your monthly payment could jump too high.

Alternative funding options

LendingClub

APR

6.95%
To
35.89%

Credit Req.

Not Specified

Terms

36 or 60

months

Origination Fee

1.00% - 6.00%

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LendingClub is a great tool for borrowers that can offer competitive interest rates and approvals for people with credit scores as low as 0.... Read More

LendingClub is an online lender providing personal loans up to $40,000. Unlike Align, LendingClub provides traditional loans with a fixed interest rate. This means that your payments remain the same every month, a benefit when you are overseeing a household budget. LendingClub does not charge prepayment penalties, but it does have an origination fee between 1.00% - 6.00%. Anyone seeking more certainty with their loan payments should explore this option.

SoFi

SoFi
APR

5.99%
To
17.67%

Credit Req.

680

Minimum Credit Score

Terms

24 to 84

months

Origination Fee

No origination fee

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Advertiser Disclosure

SoFi offers some of the best rates and terms on the market. ... Read More


Fixed rates from 5.990% APR to 17.67% APR (with AutoPay). Variable rates from 5.60% APR to 14.700% APR (with AutoPay). SoFi rate ranges are current as of August 7, 2019 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.60% APR assumes current 1-month LIBOR rate of 2.27% plus 3.08% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

All rates, terms, and figures are subject to change by the lender without notice. For the most up-to-date information, visit the lender's website directly. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.

See Consumer Licenses.

SoFi Personal Loans are not available to residents of MS. Minimum loan requirements might be higher than $5,000 in specific states due to legal requirements. Fixed and variable-rate caps may be lower in some states due to legal requirements and may impact your eligibility to qualify for a SoFi loan.

If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

SoFi is another popular source of personal loans. This online lender also provides traditional loans, with interest rates lower than many lenders because it primarily targets borrowers with great credit. SoFi charges no origination fee or prepayment fees and temporarily pauses your payments if you lose your job.

Payoff

APR

5.99%
To
24.99%

Credit Req.

640

Minimum Credit Score

Terms

24 to 60

months

Origination Fee

up to 5.00%

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Advertiser Disclosure

Payoff is a financial services firm that offers personal loans mainly to help consolidate credit card debt.... Read More


All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

Another online lender, Payoff lets you apply online for a personal loan. The company charges no application fees, and applying does not impact your credit score. You can choose a loan amount between $5,000 to $35,000 and terms from 24 to 60 months.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dan Rafter
Dan Rafter |

Dan Rafter is a writer at MagnifyMoney. You can email Dan here

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Where U.S. Families Are Leaving in Droves — and Where They’re Moving to

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

While some media outlets report increasing challenges for families seeking a comfortable life in America’s biggest cities, leading to declining birth rates, other research claims most cities and metropolitan areas are as family-friendly as the nation as a whole. What’s clear is that the cost of living, and in particular the cost of childcare, presents significant challenges for those raising children in 2019 and beyond.

We analyzed U.S. Census Bureau migration data to understand which areas families with children are moving to, as well which metropolitan areas they are moving away from. For the purposes of this article, we defined a family as any household with children under the age of 18. Final rankings were determined by subtracting the number of families who left a metro area between 2016 and 2017 from the number of families who moved in.

Key findings

  • Riverside, Calif., took the top spot for highest migration, with a net inflow of 6,279 families. Nearly 15,700 families moved to Riverside while just under 9,400 left.
  • Phoenix, Ariz., was the second most popular spot for families to move to. In total, this metro saw a net inflow of 5,580 families. This city is also known for being a destination of choice for retired seniors and snowbirds, thanks not only to good weather but also retirement-friendly tax laws.
  • The country’s largest city, New York, saw about 38,100 families leave and 13,149 move in. This created a net outflow of just under 25,000 families, making it the city families are most likely to leave.
  • Other big cities like Los Angeles and Chicago did not perform well in this analysis, either, ranking second and third for net outflow of families. The good news for big cities is that they are the ones best able to recover from the loss of families. With a large population of young people, it is possible these cities can naturally replace the families leaving.
  • Apart from the three largest cities, other large cities round out the bottom 10. San Francisco, Washington, Miami, San Diego and Seattle all saw a net loss of families from migration.
  • On the state level, the most popular states for families to move to were North Carolina, Massachusetts and Texas. Those states saw a net gain of 10,108 families; 8,092 families; and 7,643 families, respectively.
  • The worst-performing states, according to our analysis, were New York, California and Indiana. New York lost 23,276 families; California lost 15,690; and Indiana lost 7,670.

Which states families are moving to

Riverside, Calif., ranks first on our list of the top 25 places families are migrating to. It’s followed closely by Phoenix, then by Tampa, Fla.; Portland, Ore.; and Orlando, Fla.

Surprisingly, these states rank relatively low on MagnifyMoney’s list of the top 25 happiest states in America. In that study, Arizona ranked 17th, followed by Oregon at 18th, while California and Florida came in 21st and 29th, respectively. Diving deeper into the categories that contributed to residents’ happiness, California ranked 11th in health, while Florida came 46th in economic stability.

Surprisingly, while the state of Arizona has a lower total population overall than California or Florida, its capital city, Phoenix, ranked second in the number of new families moving in. Florida is also a hot spot for educated workers who are drawn to its relatively low cost of living and low unemployment rates. These are some of the attributes responsible for two cities in Florida ranking in the top five places families move to.

Which states families are moving from

The largest exodus of families comes from the nation’s largest cities. The top five cities families are moving away from include New York, which is at the very top of the list with a net mobility of almost -25,000.

The difference in net mobility between New York and Los Angeles, the next city on the list, is more than 10,000 families. Chicago, San Francisco and Washington follow more closely behind.

These numbers support the recent MagnifyMoney happiness study that ranked New York the 39th happiest state in the U.S. and second-to-last in economic stability overall, just above the state of Louisiana. Another MagnifyMoney study ranked Washington and San Francisco among the top three most expensive cities in the nation, where even a six-figure salary may not be enough to afford housing and transportation costs or live a comfortable lifestyle.

On the other end of the spectrum, Colorado ranked third-happiest state in America, and Fort Collins, Colo., is lowest on the list of metropolitan places families move away from. It also has the second lowest number of families who are moving in.

The cost of moving

From packing supplies and moving trucks to hiring staff and taking time off work, moving and relocation expenses can put a significant dent in a family’s savings. On average, it costs between $2,000 and $5,000 per move more than 100 miles away, according to Consumer Affairs.

You may want to start saving for moving expenses now — or consider options such as an introductory 0% APR credit card or personal loan — to cover costs when making a move with your family across state lines. That’s especially true if your company won’t cover moving expenses.

If you decide that a personal loan is the best option for you, try searching for the best interest rates and repayment terms on MagnifyMoney’s personal loan comparison tool, where you can see if you qualify for personal loan offers.

Methodology

In order to rank the places where families were moving, researchers looked at the number of families who moved from one metro area to another from 2016 to 2017. To define family, we looked at households with children under the age of 18. To create the final ranking, we subtracted the number of families leaving a metro area from the number of those moving in.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Barbara Balfour
Barbara Balfour |

Barbara Balfour is a writer at MagnifyMoney. You can email Barbara here

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