If you need money to meet necessary expenses, fund your wedding or take a vacation, you’ve probably considered getting a personal loan. A personal loan is a loan where you don’t put up any collateral that the lender can repossess if you default. For example, you would not need to put up your car or a house to get a personal loan. The lender has no guarantee for the loan other than your reputation. Therefore, you’ll have a higher interest rate than you would with a collateralized loan. Therefore, it is in your best interest to read some of the personal loan tips shared below.
When used correctly, personal loans can save a significant amount compared to payday loans, overdrafts and pawnshops. But they also have their pitfalls. Unfortunately, some unscrupulous lenders may try to bleed you with fees and high interest rates.
Here are six tips that will improve your chances of getting a personal loan. Also, these tips will help you qualify for better terms.
Determine What Type of Personal Loan You Need
When people talk about personal loans, they are usually referring to unsecured, closed-end installment loans. Technically though, auto loans, mortgages, payday loans, and credit cards are also personal, as opposed to business loans. Therefore, it is crucial to understand the type of loan you are applying for, whether personal or business.
If a lender realizes that your credit is not high enough to get prime interest rates, they may offer a secured loan option instead. Additionally, this is true if you qualify for a loan altogether but they may offer a secured loan option instead. If you are willing to put your vehicle or home up as collateral, you may be able to qualify for better rates with a title loan, mortgage or home equity loan. However, these examples are secured personal loans. What this means is that you could lose your property if for some reason you are unable to make the payments.
Personal Loan Tips: Check Your Credit Score
You may wonder, “What are my chances of getting a personal loan?”, And attempt to apply for any. Don’t do this.
Avoid applying for loans you know you don’t qualify for to “try your luck.” Every time you apply for credit, it gets reported on your credit report. As a result, your credit score takes a small hit. If an application rejects, the damage is even more significant. Consequently, you may have to report that rejected application in future attempts to obtain credit. As a result, this could negatively impact your chances next time a loan officer looks at your credit application.
Request your credit report for free at least once a year. Make sure there are no false or inaccurate statements on the report. You should also request your free credit score from a reputable online credit reporting company. Once you have armed yourself with this information, ask your lender what guidelines they follow when assessing loan applications before you apply.
Personal Loan Tips: Improve Your Credit Score
You may also wonder, “What credit score is needed for a personal loan?” Before considering this question, be sure to check and improve your credit score first.
Your credit score is not set in stone. Take steps to improve your credit score before you apply for a personal loan. This point is particularly important if your credit score is close to the next classification bracket.
Excellent Credit 760+
Good Credit 700+
Fair Credit 640+
If your credit score is 770, your rating is already excellent and increasing it to 780 will not help much. On the other hand, if your credit score is at 680, pushing it over the 700 marks could increase your chances of getting approved and save you a lot of money when you qualify for lower interest rates.
You can improve your credit score by always making sure you pay your bills on time. Also, reducing your debt-to-available-credit ratio can improve your credit score. If you have a late payment or some other negative item on your credit history, waiting for six months and making sure you’re not late on any additional fees will help. If you have an ongoing relationship with the lender that reported the negative item, try writing them a friendly letter requesting that they remove the negative notation.
Personal Loan Tips: Find The Right Lender For Your Credit Score
If your credit score is below 700, expect to be turned down by most major banks. Those that don’t turn you away will surely demand higher interest rates. If your credit score is below 640, your chances of getting approved for a personal loan will be slim to none with conventional lenders.
Even if your credit score limits your options to the types of lenders that specialize in high-risk borrowers, you should still be selective about who you wish to conduct business. Avoid short term payday lenders at all cost. The loans they offer have ridiculously high fees and are designed to push you into a cycle of repeatedly renewing loans, which will usually push your APR to over 400%, and sometimes even higher.
Look for an online lender that specializes in low-credit borrowers. Many lenders are not legally required to report payments to the credit agencies, but if you find one that will, this is an excellent way to improve your credit score.
Personal Loan Tips: Only Consider Reputable Online Lenders
Shopping for a personal loan online is smart. You save time and money otherwise wasted running around between brick-and-mortar lending institutions. Additionally, since online lenders have lower operating costs, you may also benefit from the lower rates they can offer.
However, plenty of shady online lenders guarantee loan approval but are nothing more than advance fee loan scams. Make sure your online lender is a state-licensed financial institution that has no past or pending lawsuits, and check with the Better Business Bureau to view their profile and see how they are rated.
Personal Loan Tips: Pay Attention to Your Debt-to-Income Ratio
Apply for as little money as possible, and be sure not to under or over-report your income. Loan officers may overlook a borderline credit score or a couple of credit indiscretions if your income is high when compared to the amount you wish to borrow. Unless otherwise specified, provide your pre-tax earnings and make sure you include all sources of revenue. When the lender’s guidelines allow it, include your spouse’s income as well.
It is essential not to fall into the habit of inflating your income or lying on a loan application. If a lender does not require documents to prove your income level, it can be tempting to get creative. Make sure you can justify and provide evidence of any claim you make about your income. If you lie about your income, you could face criminal charges. This is factual if you are unable to make payments on the loan that you obtained through a lie.
The LoanNow Difference
Once you have taken these six critical steps toward finding the right loan for you, you may find that LoanNow is a great option to meet your needs. You should know that LoanNow is not only here to help you through these difficult financial times you may be experiencing now, but we are also here to get you on the path to a more stable financial future.