Whether you have to pay a car repair or medical bill or cover daily expenses, you may be in a situation where you need a quick loan. Luckily, there are a variety of quick loan options that borrowers can get approved for as soon as the same day they apply. If your credit needs some improvement and you’re unsure of whether you’d qualify for a loan, you can prequalify to get an idea of where you stand. Read on learn how prequalification works and how you can prequalify for a quick loan with poor credit to find an option that works for you.
What is prequalification?
Prequalification is an early step you can take before actually applying for a new loan. It’s a less rigorous process where the lender gets a quick overview of your financial qualifications. If you prequalify, you have a good chance of being approved for the loan. But keep in mind that this doesn’t completely guarantee you’re approved.
How does loan prequalification work?
Prequalification can help you make better decisions when applying for new credit and save you time in the process. If you were to submit five applications for five different loans to see if you qualified, your credit score would take a considerable hit from all the lenders pulling hard inquiries. Prequalification doesn’t affect your credit score and helps you estimate what you can afford. If you’re prequalified for a loan, it means that the lender believes you will likely be approved for a loan based on your level of income compared to your debt and assets.
How to get prequalified for a loan
Here are the steps you can take to get prequalified for a quick poor-credit loan:
Fill out the application
The application process to prequalify may only take a few minutes of your time. The application will typically ask for some general information, including your name, employment status, income, and requested loan amount.
Undergo a soft credit inquiry
Once you submit the application to prequalify for a loan, the lender will complete a soft inquiry on your credit report to understand what type of borrower you are. They’ll consider factors like your income, employment, and debts to help decide if you prequalify.
Find out if you prequalify
If you prequalify for the loan, you’ll receive an offer with the amount you qualify for and the estimated interest rate. If you don’t prequalify, you’ll receive a notice explaining why you did not qualify, which may be due to a reason like the amount of debt you have or not enough income.
Apply for the loan
If you receive a loan offer that works for you, you can officially apply for the loan. The loan application may require some personal and financial details like a government issued ID, bank account number, and proof of income. Once you submit your application, the lender will decide whether to approve you. If approved for the loan, you may receive the funds quickly and start covering expenses.
The bottom line
Getting prequalified for a loan is a good idea if you have poor credit because it won’t hinder your credit score. The lender will let you know if you have a chance of qualifying for a loan with them based on a soft inquiry of your credit and income. And once you get prequalified for the loan of your choice, you can fill out a formal application and wait for approval. Make sure to do some research and compare quick poor-credit loans to find an option suited for your budget and needs.
Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.