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Personal loans are good for covering unexpected costs, like medical expenses or house renovation projects. You may also need money to consolidate high interest debt or make a purchase. A $10,000 personal loan can cover all expenses related to personal use.
You need to learn some additional information to get such a loan on favorable terms and determine what lender to choose. You can find all the necessary details on getting a $10,000 personal loan here.
How a $10,000 loan works?
There are many options allowing you to get $10000 loans. You can apply for home renovation loan options if you need money for home improvements, car loans, or title loans. However, the most common loan for such an amount is a personal loan.
Personal loans of $10,000 are generally unsecured loans allowing you to borrow a lump sum. This is one-time funding. You get the money to your bank account and pay it back in monthly payments. The terms here are generally from several months to three years. The lower you want your monthly payments to be, the longer term you should try to get.
Loan payment will cover both the loan amounts and interest on the loan. Each month your loan balance will be lower, and the accruing interest will become smaller, too. If you don't want to pay too much interest, consider paying the loan back earlier.
How to get a $10,000 loan?
Before applying for some loan options, determine why you need a loan. Determine how you will use the funds and whether you need them. This will help you to understand how much you need to get.
Determine your monthly spending. If you have many debts to pay already, another personal loan can drown your budget, and you may fall into severe debt. If you, however, take this loan to consolidate debt, you can cover your existing debts and improve your financial situation.
Time to fund
Unsecured personal loans can be funded within a week. This is possible if you have all the documentation at hand. Sometimes, the lenders can disburse funds within a business day. It is not very common among personal lenders, and the personal loan amount of $10,000 is not a small one. So, if you want to get same-day funding or receive money instantly, there are options like installment or payday loans. They have higher interest rates and shorter terms but allow you to get emergency funding.
If you apply not with a lender but with a broker, the funding will take longer. When you apply, the service will first look for suitable options and match you with them. You will have to pre-qualify to determine if the terms are good for you.
Qualifying for a $10,000 loan
Lenders focus on such eligibility criteria as your debt-to-income ratio and income when determining your creditworthiness. It is crucial for the lender to know if you can pay the loan amount plus interest back. Hence, they evaluate your financial situation thoroughly.
Your debt-to-income ratio is a percentage of income you spend on debt payments. If you have many debts, the percentage will be high, meaning most of your income goes toward covering your debt payments. Generally, your DTI is better in the range of 45% to 50% and lower.
The documents you will have to attach to your application form are:
The proof of your identity. This may be a driver's license, passport, or state identification document.
The proof of your address. You can attach a lease agreement, mortgage statement, proof of insurance, utility bills, and property tax receipt.
The proof of income. The documents are W-2 forms, 1099 forms, pay stubs, and bank statements.
Information on your employer. Though not every lender requires you to be employed, some will ask for your employer's email and phone number.
Credit score requirements
The minimum credit score requirements differ significantly depending on the lender. Many of them don't have a credit report check from credit bureaus, so they don't need to know your credit score. Some may want you to have at least 450 FICO, and others will ask for a 680+ credit score.
Normally the lower the interest rate you want to get, the higher the credit score you must have.
A credit score of 700 and higher will ensure you get approval on favorable terms.
300 to 579 is poor credit. You will have difficulties with personal loan approvals.
580 to 559 is fair credit. These are subprime loans with higher interest rates.
670 to 739 is a good credit. You have a higher chance of being approved for decent terms.
740 to 799 is a very good credit. These scores will earn you favorable terms.
800 to 850 is an excellent credit. Here, the borrowers are considered low-risk, so they qualify for the loan more easily and get favorable terms.
Shopping for a $10,000 personal loan lenders
There are many types of lenders ready to issue a personal loan of $10,000. You can research lenders like online lenders, banks, credit unions, and brokers. To determine which is suitable for you, shop for them and compare the terms.
- Online lenders are the most frequent. You can get financing fast, and the entire application won't require you to exit the house. Online lenders have diverse funding options, and you can qualify even with bad credit.
- Traditional banks are keen to work with people having a bank account with them. If you have an account with a bank and use the services quite often, you can negotiate terms with it. There are relationship discounts available for some borrowers.
- Credit unions allow members to borrow money. These are non-profit institutions, so they collect money for the members' sake. You can get favorable terms if you are a member of such credit unions.
- Brokers match different lenders with borrowers. These are quite limited options, as each broker only has a network of lenders, and it doesn't mean you will get the best loan or a loan with competitive rates. However, you can still get a decent loan with a fixed interest rate and a lower monthly payment.
How to get a $10,000 loan with bad credit?
Bad credit scores require a borrower to take loans with higher interest rates compared to the traditional options. You can expect an interest rate of 12% to 32% on personal loans.
A 10,000 personal loan is still a reasonable amount if you apply with a bad credit history.
- Shop for lenders having lower credit score requirements. There are many options available online. Pre-qualify for some of them to determine if a lender is ready to approve you for a loan.
If you already have several loans or have recently taken a loan, you have a great chance of being rejected.
Lenders working with bad credit scores determine your eligibility based not only on the score but on other factors, like your income, education, and DTI. So, if you apply with a bad credit lender, you must ensure you have other criteria met and that your financial situation is in good standing.
- You can apply for secured loan options. This way, your asset allows the lender to cover the risk of lending you the money. Yet, if you won't be able to pay back the loan, your asset will be repossessed and sold to cover your outstanding debt.
If this sounds too risky, there is an option of applying with a co-signer. Here, someone you trust signs a contract with you. They must pay back your loan if you fail to do so, so there are not many people agreeing to become co-signers. Still, if you have a person with good credit history, you can shop for lenders allowing co-signed loans.
The cost of a $10,000 personal loan
Personal loans may have high borrowing costs depending on the interest rate, loan amount, and loan term you receive. Lenders can also issue many kinds of penalties and fees you must be aware of before signing a contract.
The interest rate will generate the sum accruing on your loan amount throughout the whole loan life. The higher your loan amount is and the higher your interest rate is, the more you will pay on your loan. You can opt for a longer repayment period and even extend the term to pay less on your monthly payment. However, in the long run, you will pay more interest charges in total.
If you borrow a $10,000 personal loan at a rate of 10% and a personal loan term of two years, the total cost you will have to cover is $11,074. The interest charges will be $1,074.
Use a personal loan calculator to figure out how much you will need to pay on your loan. You can compare the options using the calculator. This will ensure you get one where you either have a lower monthly payment or don't pay too much interest.
There are fees you should look out for.
- Most lenders issue an origination fee. Origination fees cover the costs of your application. The amounts range from 1% to 5% of your total loan amount.
- Prepayment penalties are issued if you pay your personal loan earlier than your term ends. Prepayment penalties aren't common, but you need to check your loan agreement for them.
- Late fees are penalties for you making your loan monthly payment after the due dates.
All these fees increase the cost of your loan significantly, so you must review your contract thoroughly to avoid them.
