Borrowing money from the bank is usually a pretty straightforward process, but many people still feel nervous when they go in to ask for a loan. It is usually easier to get a small loan from the bank instead of a larger loan. There are a few different kinds of loans you can request from the bank, with different benefits and drawbacks, though the process for each is similar.
Contact your bank and ask what kinds of loans it has available. Most banks offer personal loans, and these are the most common type for a small amount of cash. However, many banks also offer personal lines of credit in which you are pre-approved for a specific amount of money that then remains open. You can use this line of credit like a credit card, but the interest rates are typically lower with a line of credit. Similarly, you could also apply for a home equity line of credit if you own your own home, and then use that money for your loan purposes.
Request an application for the type of loan you have decided to use. These can be filled out online, but banks can also provide a paper copy if you prefer to work with paper.
Fill out the application completely. Expect to provide information about your income, work history, credit history, assets, outstanding debts and reason for the loan. The bank will use this information, plus your history with the bank and your credit report, to make a decision regarding your creditworthiness.
Return the application to the bank, along with any supporting documentation it requests. In most cases, the bank will want proof of your income at the very least, which might include paycheck stubs and income tax returns. The bank might also request proof of your outstanding debts. In addition, it might request that you provide information about your bank accounts with other banks.
Sign the loan contract if you are approved. The approval process can take several days to several weeks, depending on the bank and the number of applications it receives. Once you have been approved, go into the bank and review the loan contract. Do not sign until you understand all the terms and conditions of the loan.
- If you need to borrow money for a small business, consider contacting the U.S. Small Business Association, which has loan options for small business owners.
- Look for any fees or penalties that were not discussed with you ahead of time. Some loans carry a pre-payment penalty where you will be charged a percentage of the loan amount if you pay it off early.