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Getting a Loan in the USA

Getting a Loan in the USA

Getting loans in the U.S is not that different a process when you compare it to other Western countries like the U.K, although they may vary when it comes to credit modeling, the way credit score is calculated and how it's used. In both the U.K and the U.S., there is some paperwork you'll need to file in order to apply for a personal loan. You also have to make sure your financial data is enough to make the cut. We'll walk you through some of these factors when it comes to borrowing money in the U.S.

1. PAPERWORK

Usually, for personal loans, financial institutions in the U.S. request the following information:

PERSONAL INFORMATION: Normally, your driver's license, passport, or Social Security card is enough.

PROOF OF RESIDENCE: You can use an electric bill or similar.

PROOF OF INCOME: They'll ask for a filed tax return or a pay slip.

EMPLOYER'S INFORMATION: Your company's name, details, and manager's phone number.

2. LOAN APPROVAL AND CONDITIONS

Credit institutions may run the application through repayability tests, depending on the amount of income you receive and the credit score you have. Afterward, they will give you an estimate of the amount they're willing to hand over, as well as the origination fee they'll deduct for opening the application.

You may be able to find out what your monthly payment may be by using one of the several personal loan calculators available online. That way, you'll know how your monthly budget will play out.

Most creditors will require that you have at least a fair credit, which usually ranges from 630 to 689. You can improve that by reporting any potential errors related to incorrect late payment reports you may have on your personal score. You can check your credit score by requesting a free copy from AnnualCreditReport.com, which is maintained by consumer reporting agencies Equifax, Experian, and TransUnion. 

The bigger the credit score is, the larger the approved amount may be, and a lower interest rate would ensue. In the UK, lenders usually don't rely on a bureau and, instead, each lender has its own model for calculating how borrowers manage their credits, while bureaus are used mostly to educate consumers.

The borrower may opt for getting a co-signer to obtain better loan conditions, although this possibility hinges on the lender's allowance. Another way to get access to better conditions is by collateralizing your loan with property, cash, vehicles, or a savings account.

Some online lenders work specifically with borrowers who have credit scores below fair levels. The loans they issue are known commonly as "payday loans" and are usually designed for people who need money to make it through the end of the month. These online applications usually charge very large interest rates and request repayment upon receiving next month's paycheck. Some of these apps, like EARNIN, may request sensitive information such as location tracking, or a timesheet.

3. LOAN TYPES

Lenders are normally very lenient when it comes to the way you use the funds. Nonetheless, others may request information regarding the use you'll give to the money they issue. Among others, these are some of the loan types they offer:

HOME IMPROVEMENT LOANS: For relatively large house reparations or renovations.

MEDICAL LOANS: For unpredictable medical expenses not covered by insurance or for people without Medicare.

EMERGENCY LOANS: For minor setbacks such as small medical expenses or a car breakdown.

DEBT CONSOLIDATION LOANS: For people who want to simplify their finances and reduce the number of expenses to worry about each month, without necessarily decreasing the debt amount.

REFINANCING LOANS: For people who want to get rid of the high-interest rates charged by credit cards.

WEDDING LOANS: For that special occasion. Couples who are unable to save the necessary amount in the short term to cover the expenses for a big wedding can apply for these loans.

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