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Discover Personal Loan Pre Approval
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If today’s low interest rates make you think about your loan, you have many unsecured loan options to choose from. Whether you want to consolidate debt or sell your home, getting a pre-approval is the first step. Here, we’ll tell you what you need to know about the pre-approval process and what to expect once it’s done.
We will also provide tips to help you navigate the process and choose the best loan.
Pre-approval is the time when a lender determines whether you qualify for a loan. It’s a simple process. You provide the lender with information about your income and occupation. After that, the lender does a simple credit check to see how well you’ve handled the loan in the past and whether you can easily make monthly payments.
After they do a special credit check, the lender will let you know if you qualify to borrow money with them, and if so, what your interest rate will be. You will also learn more about the loan offer during this time, including terms, origination fees and other fees charged by the lender.
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To be clear, prior approval is not a binding offer. Pre-approval is based on information on your credit report and other information you provide. A personal loan application includes other documents.
For example, your first approval may be based on a certain amount. What happens if the lender can’t verify your income? You may be rejected for a loan even if you have passed the pre-approval process.
Although many people use the terms “pre-qualified” and “pre-approved” interchangeably, there are differences that should be noted. Pre-approval is often a better indicator of loan eligibility than pre-loan eligibility. Here is the difference between the two.
Prequalification is an estimate of how much you can earn. The lender will rely on the information you provide rather than a third party source such as a credit report. The lender will decide how much you can borrow based on your income, work history, credit and other information you provide. A lender will not take your financial situation seriously until you reach the pre-approval and application stage. Because a lender can provide inaccurate information, a pre-appraisal is not as reliable as a pre-approval.
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Pre-approval is more necessary, and since the lender will check your credit report, it gives a better indication of whether you qualify for the loan. You will need to provide your information to the lender and the lender will run a simple credit report on you. This will not affect your credit score. Because the lender verifies the information you provide, they can determine for sure whether you qualify for your loan. Once you’ve been approved for a loan, you’ll know how much you’ve been approved for, what interest rate you qualify for, and other loan terms.
No, not often. Most lenders use what’s called a credit crunch. Think of it as an “extraordinary” loan. The lender looks at a report that includes your credit score and credit history, but no formal credit check (also known as a hard credit pull) is performed. A simple credit check does not affect your credit score.
FICO says that complex inquiries generally have little effect on your credit score because most people see scores below five. This drop will be short and your score should return to normal within a few months.
Although many personal lenders allow you to check the interest rate without applying for credit, not all do. Are you worried that checking someone’s interest rate could make it harder to get a loan and negatively affect your credit score? On the pre-approval page, look for a link so that the appraisal fees don’t affect your credit score or anything like that. If in doubt, ask the lender before you let them access your credit report.
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Personal loan lenders will use different methods to get pre-approved for your loan, but most will require the following steps:
A pre-approval letter is a document from a financial institution stating that it is willing to pre-approve a person’s credit up to a certain amount. During the pre-approval process, lenders will review your credit score and other information. Lenders will want to make sure you have good credit before applying for a loan.
A pre-approval letter usually states the amount you have to pay, the interest rate, the repayment period and other terms of the loan. Most letters expire when the initial authorization expires. Pre-approval letters may also include conditions you must meet, provide documents and other personal information to apply for a loan.
Once you have decided which loan is right for you, you will need to go through the pre-approval process with the lender and complete the loan application.
How Do Personal Loans Work?
When you apply for your loan, you will be asked to provide information that was not part of the pre-approval process. For example, a lender will want to verify your income with a W-2 or 1099, pay stubs, and/or a recent tax return or two. You may also need to provide a copy of your driver’s license or other form of identification and a social security card.
It’s also a good idea to have your bank account information. Lenders generally don’t require you to make your loan payments, but many offer a discount on your interest rate if you do. Autopay can also be a good idea if you’re worried about getting your payments on time each month.
Several requests for documents are pending before the loan is finalized. This is especially true if you are self-employed or if any part of your application is complex. This is normal, so don’t worry.
Once all your documents have been received and verified, the lender will send you a promissory note and other documents that you will need to sign. Once the documents are returned to the lender, your funds can be disbursed. Depending on the lender, it usually takes one business day to two weeks for the money to appear in your bank account (although some loans may take longer). When shopping around for lenders, be sure to check their financing schedules if you need money quickly.
Is The Pre Approval From Discover Reliable?
Here is a list of lenders that will allow you to apply online for a pre-approved loan. The lender will do a simple credit check and it will not affect your credit score. You’ll find out how much you qualify for, your APR, loan term, and other loan terms.
Looking for your loan but don’t know where to start? Our favorites offer fast approval and low interest rates. Check out our list and find the best loan for you.
Dana George received a bachelor’s degree in management and organizational development from Spring Arbor University. He has written and reported on business and finance for over 25 years, and is passionate about his work. Dana and her husband recently moved to Champaign, Illinois, home of the Fighting Illini. And while he doesn’t think most people like orange, he thinks they will like Champaign.
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We are firm believers in the Golden Rule, so editorial opinions are ours alone and have not been reviewed, approved or endorsed by the advertisers involved. The promotion does not cover all the offers in the market. The Ascent’s editorial content differs from the Motley Fool’s editorial content and is produced by a different group of analysts.
Wells Fargo is a marketing partner of The Ascent, a Motley Company. Discover Financial Services is a marketing partner of The Ascent, a Motley Company. Dana George has no position in any of the products mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a publicity strategy.
Ascent is a Motley Fool service that rates and reviews the best products for your everyday financial needs. Bottom line: Know that personal loans are best for people with good and good credit. The company offers great loans, long repayment periods, and no start-up fees.
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