How to Approach a Bank for a Personal Loan
A personal loan can be secured or unsecured. A secured loan means the bank will need some type of property such as an automobile or a home to be pledged as collateral for the loan. There is no collateral required with an unsecured loan. When you approach a bank for a loan, make sure you have the proper documentation. Generally speaking, one piece of identification is needed. Acceptable forms of Identification include a driver's license, passport, military identification or a state identification.
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Instructions
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Visit the bank and submit a credit application. A bank employee will need some personal information such as your name, address, date of birth, social security number, employer and proof of income such as a W-2 form and pay stubs. Banks usually require the name, address, and phone number for two or three personal references.
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Explain the purpose of the loan. The bank will usually want to know why you need a loan. Loan proceeds can be used for a variety of purposes, including car repairs, tuition, school clothes and minor home repairs. If you meet the bank's credit granting criteria, which includes stability and willingness to pay, your loan application will be approved for any of the items mentioned above.
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Sign the credit application. Once the application has been submitted and signed, the bank employee has authorization to get a credit report. Your credit file will be reviewed to make sure you are paying your other creditors and that you don't have too much outstanding debt already. If you had bad credit in the past, be prepared to explain why. A bank wants to know that your previous credit problems have been corrected.
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Decide upon a loan term. Personal loans can be set up for a variety of terms including 6, 12, 24, or 36 months. A longer term provides you with a smaller monthly payment. Make sure you receive a payment that is affordable. Review the loan terms and sign the paperwork. The bank representative will give you a copy of all paperwork.
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Tips & Warnings
If you are using an automobile as collateral, the bank will need to see it along with proof of insurance. They will take pictures of the car for your loan file.
A secured loan is more likely to get approved than an unsecured loan. Secured loans minimizes a banks risk.
Banks make consolidation loans as well. Some banks will pay your creditors for you directly, and others will give you the entire amount of the proceeds.
A self-employed individual will need profit and loss statements and sometimes a bank statement.
If the bank asks for collateral for your loan, they can repossess the property if you default on the loan.
Many banks are hesitant to loan money to someone who wants to start a business. They fear you may leave your present employer and start your business full time which would be a risky venture.
