Personal Loans

10 Things to Do — Or Not Do — After Personal Loan Preapproval

Getting approved for a loan feels great. Make sure you keep that hard-earned win by remembering these "dos and don'ts" after your personal loan preapproval.
Woman talking phone about personal loan preapproval, working on laptop at home
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By Shannon Lee
Updated on: September 9th, 2021

The day you get the good news about a personal loan prepproval is certainly a time to celebrate. But keep in mind that no matter how exciting this day may be, there’s still some time before you have actual cash in hand. In the meantime, be careful not to do certain things — or not do them — to avoid any missteps that might make receiving your loan take even longer.

Do These Things After Personal Loan Preapproval

You’ve got the okay for a personal loan? Well, almost. So now what? There are a few things you can do right now that will help clear the way of any obstacles that could make your loan take longer – or make that preapproval vanish.

Figure out exactly how much you need.

Most preapproval letters are for up to a certain amount. Determine how much you really need. Odds are you won’t be borrowing as much as the preapproval letter allows. For instance, you might get a preapproval letter from a mortgage lender, but instead of the potential $100,000 they offer, you might choose a home for $80,000. A personal loan calculator can help you figure out how much you can afford.

Keep shopping around.

Preapproval is great. But is that really the best deal, the lowest interest rate, or the best terms you can get? The ideal situation is several preapproval letters that allow you to compare and choose the one right for you. Remember, asking for preapproval is a “soft hit” on your credit rating and nothing more.

Pay close attention to details.

As you shop around, look closely at not only interest rates, but at the less obvious issues, such as fees, length of repayment terms, or even repayment penalties. Rarely are personal loans as straightforward as they seem to be at first, so watch as the details emerge to fully understand the commitment you’re making.

Keep your life as-is for now.

Personal loans certainly might give you some financial breathing room, but they’re not a license to quit your job or take other drastic moves. Keep your life moving exactly as it was before the preapproval. When you do have cash in hand, you can consider your options. This is a classic case of “don’t count your chickens before they hatch.”

Gather all documentation for the lender.

A personal loan will require a great deal of personal information and financial documentation. Start collecting it immediately, as it can take time for banks, credit card companies, and other financial institutions to comply with your requests.

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Don’t Do These Things Before the Loan Is in Hand

Just as there are some things you want to do to keep that ball rolling, there are things you should not do. You want to avoid hiccups of any kind or even changes in your credit score as the loan winds its way to your hands. Here are a few things to steer clear after the approval but while you wait for the paperwork to be completed.

Don’t request too much.

Avoid financial difficulty by borrowing only what you need and nothing more. You want to be sure you can comfortably meet your payment obligations. Besides that, it’s a nice feeling to know in the months and years to come that every payment has a purpose – you can look at your new roof, or that new flooring, or even that lower credit card debt with a new perspective.

Don’t apply for another loan.

That personal loan preapproval can leave you feeling flush with success, and might make you wonder what else you could borrow. Before you choose that new car or apply for other personal loans, reconsider. The preapproval letter was based, at least in part, on your debt-to-income ratio at that moment. Changing things could lead to not having the loan approved in the end.

Don’t plan to use the loan for other things.

Whatever you need the loan for, make a point of using it for that. Don’t think about other things you can do with the money. If it mattered enough to go through the process of getting a loan and paying interest for a while, then the reason you got the loan must still be important.

Don’t take too much time to decide.

Many preapproval letters expire after 30 days or so. While it’s great to shop around, you don’t want to wait too long to see if interest rates drop or other factors change. Make up your mind within a matter of weeks and let the lender know of your decision in writing.

Don’t move forward until you know it’s a “done deal.”

Let’s say you want to put a new roof on your home, and you have to have this loan to get it done. Don’t give the contractor the green light on the basis of a preapproved loan. If you don’t get the loan, you’ll find yourself scrambling to make up for the cash you thought you had. That can lead to serious cash problems, such as using high-interest credit cards to fund the work you’ve already allowed to begin.

Getting your personal loan preapproval letter for the best personal loan for you is an exciting moment. Enjoy the thrill but also recognize there is work yet to be done before you can enjoy that cash in hand. By taking savvy financial steps, you can help ensure the loan does get approved and your life moves forward with more financial breathing room.

About the Author

Shannon Lee is a freelance writer and occasional novelist who has spent over twenty years writing about personal finance, home improvement, education, relationships, and medical and health topics.