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Locked out by the Bank for a Loan, Here’s What I Did

Borrowers are running out of options for quick cash but the personal loans process from direct lenders is offering a solution

The Federal Reserve reports in its survey of bank loan officers that more than 8% of banks tightened consumer loan standards late last year. This is making the direct personal loans process even more important as borrowers run out of options to get the money they need.

Mark shared his financial emergency story last week and how he was able to get emergency cash fast through peer lending to pay for medical bills and other debt. His family was stuck with a medical emergency that set them back thousands and destroyed his credit, almost forcing them into a debt trap with high interest rates.

I asked Mark to come back this week to share the exact personal loans process he used to get a loan and any tips he had for other borrowers.

How I Discovered the Personal Loans Process

Mark: I wrote last week about how our family was hit with a financial emergency and how we were able to keep from filing bankruptcy but I guess I didn’t go into the actual personal loans process we used. My wife and I have always been responsible with the finances but the money just isn’t enough to do a lot of saving.

A medical emergency caused us to fall behind with bills and I missed a couple of payments on credit cards and the car. I scrambled to the bank thinking we could get a quick loan. We’ve been at the same bank for more than 10 years so I thought for sure they would work with us to keep us from drowning in debt.

We rent our apartment so couldn’t get a mortgage and there isn’t much equity on the car to refinance that. I was hoping to get a personal loan or some kind of signature loan from the bank.

What I got from the bank was much less than I hoped. This was all before missing the payments so our credit score was still ok. The bank officer told me they weren’t going to even start the personal loan process because they were limiting unsecured loans.

I was floored and didn’t know what we were going to do. After a few hours’ online, I came across this post on debt consolidation loans and how direct lenders are picking up where traditional banks left off.

I ended up checking out Lending Club and PersonalLoans and filling out applications for loans.

Editor Note: Mark isn’t alone in his direct loan application problem. The Federal Reserve surveys bank loan officers every month to ask about credit standards and lending. Almost 70% of banks tightened credit standards during the 2009 recession and the personal loan process basically came to a halt in most of the country.

Things were getting better for a while, with many banks saying they were loosening consumer loan standards. That all started to change this year and almost one in ten banks are now saying they are limiting the loan application process.

personal loans process banks

My Personal Loan Application, First Denied then Accepted

So we first went to the Lending Club website to fill out a peer loan application since we read that they usually offer lower rates. We were only trying to get an $8,000 loan to pay off the credit cards and car loan so didn’t think it would be an issue.

Our Lending Club application was denied because of our credit score. We had already missed a couple of payments since trying to go to the bank for a loan so things were going from bad to worse fast.

I then tried out PersonalLoans.com because I read that they specialized in bad credit peer loans and offered different options for borrowers. Personal Loans isn’t a direct lender but helps borrowers find lenders. I like it that way because it means the website is trying to help me find the best loan for my needs instead of just trying to get me a loan with a high rate.

Click for more information about loans from Personal Loans

The lending process is quick with your loan details and contact information on one screen.

direct lender personal loan application process

Step two is to verify your identity and employment information and that’s basically it. The website does a soft check on your credit report so it doesn’t affect your score until you agree to a loan.

When you apply for a personal loan, you’ve got a few options you can choose. Most peer lending sites will offer 36- or 60-month loans. You can borrow up to $35,000 but I didn’t want to get deeper in debt than I already was so only borrowed as much as we needed. I read on the blog that lower loan amounts and the 36-month loans usually get lower rates so that is what we applied to borrow.

Check your rate on a loan up to $35,000 – won’t affect your credit score

I got different loan offers on the site including a three-year personal loan for $8,000 at a 21% interest rate. The payment was going to be just over $300 per month, something that was easily manageable and under what we were paying on the credit cards and car loan.

The money for the personal loan was deposited directly into my bank account and payments come out through direct checking as well. With the money, I was able to pay off the credit cards and car loan. I’m hoping to pay off the personal loan faster within a couple of years by making extra payments when I can.

A few final notes to Mark’s story about the personal loan process for direct lenders and peer lending.

  • It’s a good idea to apply to a few different peer lenders to see which offer you the best rate. It won’t affect your credit score until you accept a loan so there’s no risk.
  • Make sure to check the interest rate on the loan offered. This will determine how much you save on interest payments compared to your other loans.
  • If you can spend a month or two improving your credit score before starting the peer loan application process then you might be able to get a better rate.
  • Only borrow as much as you need and make sure you make monthly payments on your personal loan or it will hurt your credit score.

Get a debt consolidation loan to pay off your credit cards – check for details

I want to thank Mark again for sharing his story and the personal loan process for direct lenders. The traditional banks have all but cut off regular people for most types of loans so it’s nice to know that peer lending is picking up the slack to get people the cash they need.

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