Shopping for a loan is very similar to finding a new home to buy. Since they both are important financial decisions, it requires more than looking for the best rate or the easiest personal loan to qualify. Before you opt to take out a personal loan there are a few consumer smart – personal loan strategies may consider adopting. Use the following strategies to fine tune your personal loan decision.

1. Know Your Credit Rating

Credit ratings qualify loan approval. Understanding how your credit rating will help a person qualifies for, Depending on a credit score, there are specific personal loans that are applicable to your situation. For instance, certain lenders specialize in extending sub-prime financing. (Sub-prime loans carry a higher interest rate).

2. Organize Financial Documents

For the loan shopper in need of a personal loan or debt consolidation loan, certain personal financial documents may be needed for approval. Generally, lending institutions request the following records:

• W-2 statements from the past two years
• Federal tax returns from the previous two years,
• Investment and mutual fund documents
• Current and recent paycheck stubs, d
• Records that demonstrate other financial sources (2nd job, commissions, interest dividend income, bonuses)
• Child support or alimony documentation
• Home and vehicle titles
• Any other assets

3. Know Your Assets

Before you begin shopping for a loan, understanding where you stand is the first step to take. The first question of consideration involves, how much loan you can afford. Add up your collateral. For example, if you have a home, car, and insured jewelry, these items are assesses to approve or calculate a loan.

• Determine how much you need to borrow
• Review the current interest rates you are paying.
• Analyze how much loan payment you can afford.
• Remember to budget your consolidation loan with a breathing space or leeway. It will prevent you from falling prey to over-extending personal finances – again.

Another important step to include in your debt calculation is to tally all current bill obligations: housing costs, credit card debt, child support, car notes, alimony or student loans. Lenders believe that 36 percent of a person’s debt should account for 36 percent of a borrower’s pre-tax income.

4. Research Different Personal Loan Products

Since personal loans come in a variety of flavors, researching different products can help you find a loan customized to your specific financial situation. To gain a better understanding of diverging lending product terms vary, review glossaries and frequently asked questions (FAQs).

Various Classifications of Personal Loans

1. Debt consolidation loans allow the borrower to refinance or reorganize debt.
2. Mortgage – a loan to purchase property
3. Mortgage refinancing – a loan where the homeowner borrows money against the equity of their property to pay off bills, apply for a lower interest mortgage (Mortgage refis- are tax deductible).
4. Equity loans – are lines of credit that can be taken out on a home with out affecting the state of the mortgage. (Depending on the terms of the financial institution, equity loans- are usually tax deductible).
5. Personal loans – are all options you have to borrow money, and make one monthly payment until you are out of debt.
6. Secured personal loans – are ideal for the consumer with collateral (in example: home, real estate property and certain specialty recreational vehicles can be used as collateral).
7. Unsecured Consolidation Loans – are a personal financial solution for the consumer who does not have assets or own real property.

Advantages Versus the Drawbacks of Secured and Unsecured Personal Loans

Secured personal loans

Advantage:

• Lower interest rate on the loan
• Ease in borrowing money
• Smaller Monthly Payments

Drawback:

• Longer repayment terms
• Risk factor involved in losing property

Unsecured personal loans

Advantage:

• No risk in losing assets
• Condensed payment terms

Drawback:

• Higher monthly payments
• Heftier interest rates

5. Search For a Personal Loan

Selecting the perfect lender requires shopping around with various lenders. Obtaining quotes of lending products available for your financial leads will enable you to make the best personal loan decision. Remember to pose questions regarding the penalties, surcharges and costs for getting the loan approval.

6. Choose a Lender

The final step to obtaining debt relief starts with the selection of a respected lender. Although the choice may be a bit challenging, consider the terms and risk factors involved with each personal loan opportunity. Remember, just because a personal loan comes with an ultra low interest loan – doesn’t mean that it’s the best loan.

The four Steps for debt consolidation loans Includes the following:

1. Applying for the loan
2. Loan approval
3. Modify your budget as debts are paid-off
4. Avoid accruing more debt during the consolidation loan process

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About The Author Glenn Keller is a veteran mortgage broker in North Florida and provides Florida and Georgia home loans.  He can be reached at 904-226-0648 or toll free at 1-800-572-5964 - email gmkeller@tds.net