How a personal loan for dental care works
A personal loan is money you borrow from a lender and repay with interest. Personal loans are typically paid in equal monthly installments. Most personal loans can be used for almost any purpose, including dental care.
Pros and cons of personal loans
Before applying for a personal loan, consider these pros:
- Many personal loan lenders allow you to borrow as much as $50,000 to $100,000
- Most personal loans are unsecured, meaning you don't risk anything of value.
Here are a few cons to using a loan for dental care:
- You're required to pay interest on the loan, and if your credit score is low, your interest rate may be higher than expected.
- You'll have a new monthly payment.
Weigh all your options and financial needs to make the right choice.
Getting a low-interest dental care loan
Ideally, if you decide to take out a personal loan to pay for dental care, you'll land the lowest possible interest rate. Getting a low rate depends on several factors, including:
Your credit score
Borrowers with solid credit scores typically qualify for loans at better rates. If your score is lower than you would like, consider borrowing the money from a lender that allows cosigners. A cosigner is someone with high credit who's willing to sign onto the loan with you. When there's a cosigner, the lender considers their creditworthiness, and if that person has a high credit score, you benefit by paying a lower interest rate.
Employment and income
Lenders want to know you're earning enough money to repay the loan. If your employment history is steady and you earn sufficient income, a lender will be more confident that you'll repay the money you borrow.
Fixed or variable interest rate loan
With a fixed-rate loan, you know upfront how much your monthly payment will be because the interest rate never changes. A variable-rate loan, on the other hand, can increase and decrease over time.
The interest rate on a variable-rate loan usually starts lower than that of a fixed-rate loan, making it appear more attractive. However, if rates increase, you could find yourself with a loan payment you can't afford.
Secured or unsecured
When you take out a secured personal loan, you put an asset of value, such as your home or car, up as collateral. While most personal loans are unsecured, you might consider finding a lender that offers secured loans to save money. A lender is more likely to approve your loan and offer you a lower interest rate when it knows there is collateral available to repossess if you miss payments.
Your repayment timeline
Shorter-term loans often come at a lower interest rate. The longer your repayment term, the more risk things will go south, and you'll have trouble making payments. The longer the term, the more risk to the lender.
How to apply for a dental care loan
1. Find out how much you need to borrow
Generally, it's best to borrow the smallest amount possible. The more you borrow, the more interest you'll pay.
2. Check your credit score
Different lenders have different minimum required credit scores. Before going through the application process, check your score yourself. The higher it is, the lower your interest rate will likely be. You can often check your credit score through your bank or credit card company.
3. Determine if you need a cosigner
If your credit score is low, now is the time to decide whether you know someone with a high score who would be willing to cosign on the loan. Remember: If you're late on a payment, it impacts your credit score and your cosigner's score.
If you stop making payments, your cosigner is on the hook to make them. Asking someone to be a cosigner is a serious matter.
4. Shop for a lender
To get a loan that works for you, compare multiple lenders. Plenty of reputable online loans are available, as well as loans from traditional brick-and-mortar institutions.
Shopping around is an essential step, as each lender has its own lending criteria and sets its own interest rates and fees. Shopping around is a crucial way to save money on your dental loan.
5. Prequalify
Once you decide which lenders best fits your needs, go through the prequalification process with a minimum of three of them. Most lenders will ask you to provide basic information, including:
- Your name
- Address
- Place of employment
- How much you want to borrow
- How much you pay for rent or your mortgage payment
6. Compare prequalified offers
When a lender says you've prequalified for a loan, it means the lender believes you will likely make it through the loan approval process. Once you've heard back from all lenders, compare each offer and decide which one works best for you.
7. Fill out a complete loan application
The only real difference between a complete loan application and the application you fill out to prequalify for a loan is providing more details. For example, in addition to basic information, you'll be asked to provide proof of income and a list of monthly debts.
8. Await final word and funding
Once your application goes through underwriting, the lender will let you know where you stand. If the loan has been approved, carefully read the contract and ask questions if you don't understand something. Finally, you'll sign the agreement and await loan proceeds to hit your bank account.
