How to Get a Loan

Just about everyone has needed fast cash at one time or another. When you want to buy a big-ticket item or have an emergency — and you're short on funds — you can take out a loan.

Although the exact requirements and terms will vary by loan and lender, there are a few general actions you'll need to take to get any kind of loan. Here are five steps to take the get a loan.

MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $100,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.

1. Review Your Credit History

Three of the most important factors that can determine the outcome of your getting approved for a loan are:

• Your credit history

• Your ability to repay the loan

• How much you have in personal assets

Your credit report shows the lender that you've handled your debts responsibly and paid your bills on time. Your credit score could mean the difference between a great interest rate and term, and a not-so-great interest rate and term.

To review your credit history, visit AnnualCreditReport.com to get a free report each week from each of the three big reporting agencies: Experian, Equifax and TransUnion. Check for any mistakes on your report and if you find any, address them immediately.

2. Determine Your Loan Type

Many different types of loans exist, so first decide what type of loan you need.

Secured vs. Unsecured

Loans come in two forms: secured and unsecured. Secured loans require you to put up collateral such as a home or car so that if you don't repay the loan, the lender can recoup the money by selling the collateral. Auto and mortgage loans are almost always secured loans.

An unsecured loan doesn't require collateral, which means that if you don't pay the loan the lender can't access your property to get the money back. In general, student, personal and credit card loans are unsecured. There are still consequences for not paying an unsecured loan including negative marks on your credit report which can affect your ability to get financing in the future.

What Do You Need a Loan For?

When you apply, the application will ask what you intend to spend the money on. That's because the terms of a loan will often have rules about what you can use the money for. The different types of loans include:

• Auto loans: Designed for buying new or used vehicles, auto loans.

• Personal loans: This can be used for credit card debt consolidation or to fund big purchases. Some lenders will not allow you to use personal loans for buying a car or paying for education.

• Small business loans: If you're an entrepreneur and you want to know how to get a business loan, look into a small business loan for capital.

• Student education loans: You can get federal student loans or private student loans to help with higher-education costs.

• Mortgage loans: Home loans enable consumers to buy homes and pay them off over a number of years.

3. Find the Right Lender

It's easy to get a loan these days. Lenders come in all shapes and sizes and include:

• Local banks

• National banks

• Credit unions

• Online loans from financial institutions

• Peer-to-peer sites like Prosper and LendingClub

• Car dealerships auto loans

• Federal, state or private student loan programs

Finding the best lender means finding the best one for your specific situation. For example, if you're a member of a credit union, it's smart to check your options there first. Credit unions are nonprofit organizations and typically offer members lower loan rates. If you're not a credit union member but want to keep things local, you might choose a community bank loan over a national bank loan.

You can even get a personal loan online today. Many companies offer quick, easy, online applications with short waiting periods. Peer-to-peer lending sites are another option — you don't have to use a financial institution with these types of loans; instead, borrowers are matched with individual lenders. If you're buying a car, you'll usually want to choose a direct loan over a dealership loan; dealer loans are best for bad credit loans.

4. Compare Loan Rates and Terms

With excellent credit, you should be able to get great rates and terms on anything you need. Although it's still possible to get a loan if your credit is fair or bad, it can be more difficult to get approved and the rates will be higher.

Shop around for the type of loan you need and compare your options. Research lenders thoroughly before you apply for a loan. When you're doing your research, consider:

• How much you are borrowing: Don't try to borrow more than you can pay back. Use a loan calculator to figure out how much you'd be likely to get. Knowing how much of a loan you'll qualify for can be helpful when you're talking to lenders.

• The loan's term length: For some types of loans, if you opt for a longer repayment period you might lower your monthly payments. Remember that a longer-term loan will likely mean you'll pay more interest over the life of the loan.

• Interest rate: The annual percentage rate is the key to the total cost of your loan. Even though differences in rates might be measured in tenths or hundreds of a percent, with a high APR, you'll wind up paying more interest over the long term and have higher monthly payments.

5. Apply for Loans Selectively

Although you can apply for several loans at once, doing so could negatively impact your credit score.

Whenever you apply for a loan, the company conducts a credit check on you, which means they take a look at your credit report to see if you're a reliable borrower. When a company does this it's called a hard inquiry, which shows up on your report as a company deciding whether or not to lend you money.

Hard inquiries can ding your credit report and lower your credit score. Too many hard inquiries on your report can look like you're scrambling around for money, which is the last thing a lender wants to see.

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