Retail Loans For Your Store: Always Open

The idea of starting a business can be so exciting. The freedom of being your own boss, the joy of building something that is yours. The excitement of spending your days doing something you are passionate about. Hopefully leaving something for your kids, the possibility of growing your savings account more than you can with a regular job…. And then, reality sets in. And you are suddenly overwhelmed. You need money and time to run this thing and make it successful. I know. I’ve been there.

I have always been a business-minded individual. As a child, I was always trying to carry out some type of money-making venture. When I was seven, I talked my best friend into making bookmarks with me to sell for $0.25 each. It did not go very far, but the mailman was nice enough to buy one. At ten, I sat at the edge of my yard with signs and a giant bucket to raise money for charity. That also did not go very well. Possibly because I lived out in the country on a road no one went down.

Those failures did not dampen my spirit though. Even now in my thirties, I still have a ton of ideas. The trouble is getting them started. Having the time and money needed to fulfill these ideas is hard.

All You Need to Know about Retail Loans

I assume that you, too, are looking to start or grow a business or you probably would not be reading this now. You have probably heard of business loans and know that they could do wonders for your business, but they are not always the answer. Let’s take a look at business loans, retail loans in particular for those in retail or hoping to get into retail. By the end of this article, you should have some clarity on what moves you should make.

Are Retail Loans Different from Personal Loans?

Both business and personal loans are money that can be used for a variety of things. There are a couple of differences, though. Personal loans are based on personal information, like your personal credit history. Business loans are dependent much more on your business history.

Also, if you default on a personal loan, they can take personal property as collateral. This is often- though, not always- different from business loans. For instance, if it is a home-based business or it fits some other criteria, your personal property may still be collateral. Before signing any contracts, be sure that you understand just what you are risking.

There is also the fact that- as stated above- a business loan depends on business history. In other words, if you have no business history, you probably will not qualify for a business loan. It is best to have at least a few months of business under your belt before applying for a business loan.

What does this mean for start-ups? You should apply for a personal loan, instead. Or, you may look for a business credit card to help you build business history. In fact, both start-ups and established businesses may find better interest rates and terms through either personal loans or business credit cards.

Just like you shop for the best insurance rates, shop around for the best loans. (And if you do not shop around for insurance, you should start now for the sake of your wallet.) You can do this easily by comparing each loans shop online. At the very least, you can gather enough information to know where to apply. Hey, you have a business to run here- you have to save time where you can.

Why Get a Retail Loan?

There are plenty of reasons to get retail loans if you are in that industry. Some of the most common are listed below:

Starting a Business

Starting a business can be extremely expensive. The total depends on the type of business, but some costs can include:

  • Licenses
  • Equipment
  • Inventory
  • Trademarks
  • Website hosting, design and logo
  • Office and business location
  • Marketing and advertising
  • Office supplies
  • Utilities
  • Insurance

And that list can grow. Not every business needs everything on the list, but those are the most common costs.

Growing a Business

Some existing businesses decide that they want to expand. Again, the exact costs depend on the business you run and what all you want to do with the expansion. You may want to rent or purchase more space, buy more efficient equipment, hire new people, have more inventory, open an out-of-state location, and more.

Buying an Existing Business

There are businesses out there whose owners decide they do not want it anymore. They may be tired of the headache, feel that they are not a good leader, or they may just want to retire or pursue other business ideas. Either way, rather than shutting the company down, some opt to sell their business to someone else.

This can be a good move for people looking to run a business. All of the start up is already done and the business likely already has customers and a reputation. The new owner typically has to just go in and continue what is already happening.

New Equipment

Perhaps you have discovered a new piece of equipment that will make your employees’ jobs easier, protect your physical location better, or make the company run more smoothly in general.

New Inventory

Some businesses need to purchase new inventory, either to replace existing inventory or simply add to it to increase sales.

A Complete Overhaul

There are times that just getting new inventory or new equipment is not enough. Sometimes, if a company is not doing well or has simply become stagnant in growth, it needs a complete overhaul. This might include a new location, new inventory, new or more employees and management, a fresh advertising and marketing campaign, and more.

Other Expenses

Marketing is a part of every single business that exists. The amount and type of marketing varies, though, according to the business and those in charge of marketing. Some marketing is free while other marketing campaigns can cost a fortune. In addition to marketing, there may be other expenses you run across.

Types of Retail Loans

There is a variety of retail loans for different people, businesses, and purposes.

Lines of Credit

Just like a personal line of credit, a business line of credit makes a certain amount of money available to you that you can withdraw as you need it. This is a good choice for those who do not know all of the expenses they will face yet, but the interest rates can get high, so be sure to shop around.

SBA Loans

If you get approved for an SBA loan, you are quite literally in the money. That is because the idea behind them is to actually help small businesses thrive. They offer great interest rates and repayment terms. Unfortunately, these are quite possibly one of the hardest retail loans to get, so apply for them but apply for other types as well.

Business Credit Cards

If you can find a business credit card with good interest rates and a high enough credit limit, they are great choices.

Short Term Loans

Short terms loans are available for businesses, but they have higher interest rates and have to be paid back pretty quick- that is why they are called “short term”. These can be helpful if you do not have other options, but be sure that you know what you are getting into- in other words, read the fine print. Sometimes, they are just not worth it.

Consumer Loan

While these are not termed as business or retail loans, we have already established that you can use a consumer loan or personal loan for a business. Some of the most popular ones to use for business include a home equity line of credit and personal installment loans. You might also consider a loan for refinancing other debt, such as credit cards or your mortgage. This is because you are not only minimizing your debt and opening up more spending room for the business, but you may also refinance for more than you need and use the extra for business.

If you are unsure of what to do, hop online, find a loan checker, and discover what options are available to you based on your credit and financial situation.

A Guide to Understanding Different Types of Business Loans

Know What You Need

It is best not to just go apply for retail loans without having a plan for the loans. First, most lenders want a good idea of what you are spending the money on. Unlike personal loans with which lenders barely ask, you have a better chance of being approved if you have a specific plan that shows a good chance of successfully increasing your business income.

This is not to say that plans do not change, that the amount you thought you would spend on something is different, or that you need to add or take something away. You are not a fortune-teller and lenders know that. However, always check the fine print or ask the lender if changes will be a problem. Most likely, they will say “no”, but it is always best to be sure. So, before you start looking for retail loans, think it through and have a pretty good idea of what you will spend the money on as well as how that will benefit the business.

Be Strategic With Your Retail Loans

You need to know what you are doing with your retail loans. Set a plan that provides a step-by-step process of what you will spend the money on, at what point you will spend it, the maximum you will spend on each thing, and so on. Having a clear path laid out will not stop you from needing to make changes, but it will help you avoid unnecessary purchases and expenses.

Where to Get Retail Loans

Like personal loans, there are many places you can get retail loans. Check with your personal bank as sometimes- though not always- you have a better shot at approval since you have a relationship with them. In almost every city, there is at least one type of lending business that is not a bank. You can take the time to call around to each place and ask questions, or you can use the Internet to possibly locate multiple options that are available to you.

Or, you can shop for a loan right here, right now. And you know that Loanry brings you ONLY reputable lenders. So, if you’re interested to see whether you qualify for a loan with one of our lenders, put in your information below and you’ll get offers in seconds.


Keep Them Separate From Personal Funds

Always, always, always keep your retail loans, or any other business loan, separate from your personal funds. Even if your business funds come from a personal loan, they need to be in a separate account. This will keep you from unwittingly spending your personal funds on your business or your business funds on your personal bills.

When your funds are kept separate, you know what you have available for each category so you can make appropriate decisions. If you do decide to use some of your personal money on your business, it will be a conscious decision.

Other Ways to Finance a Business

Of course, there are always alternatives to getting loans, including retail loans. Here are some ideas:

Start Online

This is the digital age, meaning that you no longer have to have a physical location to be successful. In fact, running a business online can be freeing- and much less expensive. Since the overhead is much lower, profit margins are also higher. Instead of getting retail loans for a physical store, look into dropshipping or opening an online store and shipping the inventory yourself. Start somewhere like Amazon.

Starting an online business still requires funds, but the amount is much lower. Here is an idea of costs:

Hosting and domain name for your website

You can expect to pay between $100 and $200 upfront, but that is for the whole year.

Website design

If you go through a host that supports WordPress, as most do, you can set your site up completely on your own for free. However, it can be time-consuming, especially if you have never done it before. If you choose to have someone do it for you, you have a ton of options. Your hosting service usually has the option for you to just pay them, and it is usually reasonable, often for $100 or less. Look on Fiverr for skilled people looking to grow their reputation. A lot of bloggers will do it for $100 to $200, sometimes less. And, of course, you can always hire a design firm or more expensive freelancer to do it, but you can expect to pay more this way.

Website theme

WordPress offers plenty of attractive free themes. Unfortunately, the customization is limited. You can do like I did and start with a free theme, then work your way up. I can say, though, that I wish I would have started with a premium theme. It would have saved me a lot of frustration as I spent countless hours trying to make things look like I wanted.No matter if you or someone else is setting up your site, you will need a theme. Sometimes, this is in addition to the cost of paying someone to do it, but sometimes, the theme is included in the price. You can check on this if you choose to hire someone. They will let you know what all is included.

Trademarks, Copyrights, and More

Not everyone will need these, but if you come up with an incredible logo design or business name, you should think about this. You do not want someone stealing your brilliant ideas.

Payment processor

These do not always charge upfront. They usually just take a percentage of the sales they process. Sometimes, you can find free ones, or they come included in a design or service, but sometimes not.

Dropshippers

If you do not understand dropshipping, that’s ok. It is actually pretty simple but some people explain it in a complicated manner. Let’s see if we can make it easy to understand: We’ll use the retail giant Walmart as an example, mostly because the majority of people have shopped there at least once in their lives. Okay, so Walmart is very simply the location that brands are sold at. For instance, the clothing brand George is at Walmart, but Walmart itself does not make the clothing. Instead, George sends Walmart the items and Walmart sales them- but, the inventory is usually sent to Walmart’s warehouses until individual stores need them. Simple enough, right? Okay, so Walmart also has an online store from which you can still purchase George items as well as other items normally sold in stores. However, if you have ever shopped online, you have probably noticed certain items that state “Sold and Shipped By” someone that is not Walmart. Walmart never touches that inventory, but they are an online storefront for these brands and make a percentage of the profit. That is basically dropshipping.

You provide the website, or the “storefront”, and link up with shippers. When shoppers purchase an item on your site, the order is sent to the shipper, the shipper sends the item directly to the customer, and you get a cut of the sale without ever storing or even having to see the inventory. Sounds awesome, doesn’t it? It really is- I can say for sure because I have tried it myself. If you decide to go this route, you look for drop shippers, like Doba and AliExpress. They often offer you a free trial for a certain number of weeks to give you time to set up your store and see if you like them as a business partner. Then, you will be a monthly fee. This fee is usually $30 or less, though I cannot speak for every drop shipper. It is, though, the simplest and cheapest way to start a retail business.

P.O. box

You do not want to display your personal address on your website. So you need a P.O. box to list as your business address.

Email provider

I could go on and on about how an email list is an online business’s best asset. But if you simply Google the term “email marketing”, you can find every advantage under the sun. Suffice it to say, you need an email marketing provider and a way to capture your customers’ email addresses. You can pay about $6 a month or more if you want extra features to get a business email address from Google. For as little as $10 a month, you can get an email marketing service, like Mailchimp. Most businesses opt for more expensive services due to the available features, but the most popular I have found is ConvertKit for about $30 each month.

Other expenses

Your state or county may or may not require licenses and documentation to run your online business. So double-check to keep yourself out of trouble. You will need equipment, of course, such as a laptop, tablet, or computer and internet to go with it- unless you want to use your local library’s internet. You will run across other small expenses most likely, so add in a little padding when calculating your costs.

I’ll stop there with the basics. But the point is that you can start an online business for next to nothing. Or spend more on extra things you want or feel you need. Also, if you want, you can always open a physical location with the profits you make online. However, you may find that running the business online is favorable.

Raise the Funds

You can always raise the funds, or at least some of them, in many different ways. Pick up extra shifts, hold yard sales, pick up a second job (yes, in addition to trying to run your business), sale personal items online, sell name brand clothing at ThredUp, or anything else you can think of. You might also check with your cities rules on fundraising, like the Girls’ Scouts or cheerleading squads. There are a ton of fundraising options, just make sure that there are no rules about who can do the actual fundraising.

Ask Family or Friends for Help

If you have a supportive group around you, they may be willing to help by throwing in some cash or skills to get you up and going. You might get a loan from one of them, or you might find yourself with a partner who wants in on what you are doing.

Save the Money

There is always waiting until you save the money. But for some people, that may take forever on their regular income. However, by budgeting your income and being serious about saving, as well as adding in some of the other options here, you can save a little quicker. Besides, you do not want to jump in headfirst without doing research and having a plan. Use the time you are saving or earning to solidify what you want to do with your business. Even if you only make or save enough money to knock off some of what you need, that is some that you will not need to borrow.

Conclusion

If you want to start a business, do not let overwhelm or a lack of finances stop you. As they say, “Where there’s a will, there’s a way”. Often, the hardest part is finding the way and getting started. Other times, it is a lack of clarity and time. Start your path to success by stating clearly what you want. And research what steps you need to take to get there. Then, get to work on those steps.

Even if you only have an hour a week to put toward your business, progress is progress. Consider this, though: The right amount of business financing, be it through personal funds or loans- can open up your time. When calculating start-up costs, consider taking time off from your other job. A loan can help cover your personal expenses while you are busting a move to get your business up and running.

Some people go as far as to quit their job to focus on starting their business. I am a huge proponent of following your dreams and doing what it takes to make them happen. But I would not suggest leaving your source of income unless you are certain you have another one coming. It may be wiser to just take some time off. If you choose to leave your job, you need to ensure you have the money to repay any loans you take out or you may find yourself in a load of trouble.

Various Ways to Use an Unsecured Home Improvement Loan

An unsecured home improvement loan gives you money to fix up different areas of your home. You may have already borrowed money to buy your home so why not borrow some more money to make sure you get it in perfect shape for you? Using these types of loans can be a convenient way to pay for repairs and renovations. An unsecured home improvement loan is just a personal loan option that has a fixed purpose for home repair.

How to Find an Unsecured Home Improvement Loan

With an unsecured home improvement loan, you qualify for a certain borrowing amount, interest rate, and repayment terms based on your credit profile. These are available from many banks, as well as online lenders. Different lenders will have different options and no two lenders are alike. Different lenders will also allow you to borrow varying amounts. You may need to borrow more for bigger home projects, such as building a pool.

You can find this type of loan online, here, on Loanry. Our partner Fiona presents you with credible lenders you should definitely consider when loan shopping. And Loanry connects you with those lenders who may be willing to give you a loan based on the information you provide us with here:


Applying for an Unsecured Home Improvement Loan

When applying for an unsecured home improvement loan, there are some tips you can follow.

Apply before You Need to Start Any Improvements

It’s a good idea to start planning ahead and apply for a home before you plan to start improvements. Timing and paperwork may take longer than you think so start the process at least 30 days in advance.

Determine How Much You Need

Consider the project amount and be sure to leave some room for error. Keep your budget, the total loan-to-value ratio, and how long you want to pay in mind. Don’t take out a loan that is going to strain your finances to make just cosmetic improvements. Don’t go into foreclosure just so you can have a nicer kitchen.

Determine the Preferred Loan Term

Consider your budget and how quickly you can pay off the loan.

Get Prequalified

When you get prequalified, you can find out what your interest rates will be so you can compare what different lenders can offer you. You can get prequalified with multiple lenders but you want to make sure they are using only a soft inquiry. Multiple hard inquiries can ding your credit score.

Consider Your Eligibility

While you are getting prequalified, you may want to consider your eligibility. Consider how qualified you are for the loan. Not only should you consider your credit history but also the loan-to-value ratio and the debt-to-income ratio as important factors in qualifying for the best rate and approval.

Using an Unsecured Home Improvement Loan

You can use an unsecured home improvement loan for a number of things, including painting the home, kitchen remodels, replacing the roof, and more. If you choose the right project then you can have an investment that will pay off in decades of personal enjoyment, as well as improved resale value.

Kitchen Remodels

Many people consider the kitchen to be the heart of the home and any improvements in this room can pay off. You may expect to recoup 60% to 120% of your investment on a remodel, as long as you aren’t going overboard. You don’t want to make the kitchen much fancier than the rest of your house or the rest of the kitchens in the homes in the neighborhood. One of the best things you can do for a kitchen remodel is to replace old appliances with energy-efficient models. Not only are these appliances better for the environment but they can also help you save money since they use less energy.

Bathroom Additions

If your home has one bathroom then you can make good use of your investment when you add another one. If you are looking for space in your home for an extra bathroom, look at underutilized spaces. Consider other spaces, such as areas under the stairs and closets. If you want a half bath, you need about 18 square feet but if you want a full bath, you need between 30 to 35 square feet. The cost of adding a bathroom will depend on the type of accessories and additions you want.

Reinventing a Room

Adding square footage to the home with a new room can be a very expensive project. Although you can recoup some of the investment, the cost can quickly get out of control. Instead, you can reinvent existing spaces to save money. For example, convert the attic into a bedroom or finish a basement. Homeowners may be able to add small apartments in or over the garage, which can be rented out as a room. Before you start, think about how you and potential buyers can use the space. Versatile rooms will have great appeal for potential buyers. Basements work well as game rooms or second living rooms. Some people even turn this space into a small apartment for a tenant or aging relative. Attics can work well for game rooms.

Energy-Efficient Windows

Buyers will shop for energy efficiency in mind so anything you can do to make your home more energy efficient is best. Old drafty single-pane windows are a major turn off. You can expect to recoup a lot of the cost when you invest in energy-efficient windows. There can even be different available rebates and offers in your area.

Deck Addition

Adding a deck can help increase the value of the home. Outdoor living spaces are becoming more desirable, especially as people are favoring staycations. If you make your backyard and deck more appealing, your house can be more appealing to any prospective buyer and you can also enjoy it. The cost of adding a deck can vary widely. And it will depend on the size and the bells and whistles you want added.

Energy-Efficient Insulation

If your home lacks any basic insulation and has old doors that let the cold and hot air escape the home then this can be a problem. Homes that don’t have the best energy efficiency in mind cost more to maintain and live in. Updating the home to save energy may not cost a lot of money and can make a big difference.

Basic Updates

Basic updates add some of the most value to your home. Fix the roof if it’s leaking, keep the paint fresh, and replace wood that rots. Get rid of any mold that you find. These types of chores can keep your home from deteriorating over time.

Upscale Garage Door Replacement

This may not be an exciting upgrade but when you replace your current garage door with an upgraded model, it can yield you about 98% in recouped costs. Some of the best garage doors are made from durable materials, such as wood composites, steel, aluminum, and high-performance additions, such as energy-saving insulation and glazing. Wood may be a classic choice but it’s not very weather resistant.

Updated Stone Veneer

Replacing the vinyl siding on your home with stone veneer in areas like the entryway can be a big curb appeal boost for the home.

Home improvement projects can extend the life of your home so you are less likely to pay for privacy repairs down the road. For example, when you replace the gutter and the roof, you could prevent future water damage and extend the life of the home’s exterior components.

You may think you can save money on your projects by doing some of the work on your own but it may not always be the best, especially if you don’t have a lot of experience in home improvement. You could try DIY if the project is small enough for you to learn quickly and you are okay with the project just being good enough. There is a chance that the project won’t turn out as well as the pro’s work if you do it by yourself.

The floor tiles can be uneven or a painted room may have some visible brushstrokes. It’s much better to hire a home improvement contractor if a mistake could have disastrous or serious consequences. Faulty electrical writing could cause a fire so anything with electrical needs shouldn’t be done by yourself. If the home improvement requires permits then you also want to work with a contractor.

How to Determine if a Home Improvement Project is Worth the Cost

One of the best ways to determine the value of a project is to look at the project’s cost versus its value assessment. Before you begin the home renovation project, consider some of these questions:

  • Have you budgeted for this projected?
  • Is the remodel a long-term lifestyle change or a temporary fix?
  • How long do you plan on living in the home?
  • Can you afford the renovation?
  • How long will the renovations last?
  • Will improvements add value?

It’s important not to guesstimate your renovation budget. There will be unforeseen costs along the way. Plan ahead by getting a clear view of how much you can spend. Talk to different contractors, compare the rates, and get priorities in check. The size of your project will largely be dependent on the budget. But it’s important to remember that sometimes a quick fix can cost more money over time than a larger renovation that could solve a big headache. For example, if there is mold growing on the first floor tile because of a leak, replacing the grout could solve the problem in the short term. However, in order to keep the mold away for good, you may want to completely redo the tile and upgrade its quality. It may even be worth it to replace the pipes and drain as well.

Another thing to consider is if you are staying in your home long term or prepping it for sale. If you want to put your home on the market in the near future then make sure any renovations appeal to buyers. A big misconception is that major home improvements will equal more money in the final sale. But that’s not necessarily the case.

You want to consider the value of renovations in your area and not just the national average. Energy efficiency projects may have more value in colder climates. A swimming pool may do nothing to help buyers. However, in warmer regions, the pool can actually attract buyers to the home. Areas of your home, such as an office, may fit your lifestyle but pouring money into the home office may not help you if you have buyers who want to use the office as a playroom instead.

It can be hard to live through renovations, so it helps to have some extra money set aside to stay in a hotel or plan a day out if you need to spend several hours away from home while contractors are working.

Things to Look for When Choosing an Unsecured Home Improvement Loan

You always need to shop around when looking for a consumer loan. The right home improvement loan is only going to be as good as the lender offering it. In order to figure out if you have the right lender, there are some things to keep in mind.

Loan Type

While you may be looking for an unsecured home improvement loan, loans can also come secured. Unsecured loans require a check of your credit history and secured loans will require you to put up some sort of collateral.

Eligibility Requirements

This is one of the first things you want to check once you figure out what loan type you want. Some lenders charge application fees so don’t waste time and money applying for a loan you won’t qualify for. Research ahead of time to learn about the minimum qualifications and only apply for lenders that will likely grant you the loan. Home improvement loans for bad credit are available if you do enough research to find lower eligibility requirements.

APR

When you are looking at different lenders, check the APR. This is the interest rate plus the origination fee for borrowing. To find the best APR, you need to make sure your credit score is at its best. While there are home repair loans for bad credit, these don’t have the best APR. You may see a lender that offers a low promotional interest rate. Keep in mind the promotion period will eventually end and then, depending on your credit score, this low APR could climb into double digits.

Repayment Terms

Personal loans will typically be given for one, three, and five-year repayment terms. Some lenders may offer longer terms. The longer your term, the more interest you will pay. Use a loan calculator to see how a longer repayment term will affect your interest payments.

Fees

These can include late fees, processing fees, and closing costs. Lenders can roll the closing costs into the loan balance instead of requiring payment at closing but it helps to know all the fees you could be facing.

Other Benefits

Lenders can offer plenty of different benefits so you may want to prioritize lenders that allow you to use a cosigner or a lender that gives better repayment protections. Whatever perk is important to you, be sure not to sign on the dotted line if you don’t get it in writing.

Should You Finance Your Home Improvement Project?

If you are already thinking about financing your home improvement project with an unsecured home improvement loan then you likely have considered if it is the best course of action for you. If you haven’t yet, then take the time to consider whether you should borrow money for this endeavor and if there are alternatives you should try first. For example, if your project only needs a few thousand dollars and you already have good cash flow then you may just want to save up for your project instead of adding to your debt. If you don’t have the best credit and may not get a favorable rate then consider asking a friend or family member for a low-cost loan or work on improving your credit score. Whatever you decide, make sure to weigh your options so you can pick the best one for your specific financial situation.

Pros and Cons of Home Improvement Loans

Unsecured home improvement loans are beneficial for making upgrades and repairs that can help increase the property value. If you are strategic about home improvements then you can increase the value of your property so much that the loan can pay for itself. The loan also allows you to jump on some much-needed repairs instead of having to wait until you have enough money saved up. If you wait to make certain repairs then the damage can be worse and can end up costing you more in the long run.

Even with all the pros, there are some cons of unsecured home improvement loans. If it’s a poor or fluctuating economy then the interest rates can be higher, which means the loan can cost you more in the long run than any increases to the value of your property. This is also true if your credit score isn’t great enough to get a good rate. Shoddy work on the part of the contractors you hire can also end up causing the home to lose value. So it’s necessary to research the best ways to spend the money you have from an unsecured home loan to minimize the risk.

What about Emergency Home Repairs?

An unsecured home improvement loan can be used for regular home improvement projects but you may need financing at some point for emergency home repairs. While you can use an unsecured home improvement loan for emergency repairs, there may be other ways to finance these costs.

Homeowners Insurance: Before you pay for repairs out of pocket, you should see if the damage is covered by your home insurance policy. You may only need to pay your deductible and can save a significant amount of money.

Government Assistance: Depending on what repairs you need, you may qualify for government assistance. This will depend on the location, age, and income.

Disaster Relief: If your home suffers damage as a result of a natural disaster then you could get funds from the Federal Emergency Management Agency. These funds usually only cover small repairs that ensure safe living conditions.

Nonprofit Organizations: Depending on the circumstances, there are also non-profit organizations that can be willing to help with some home repairs.

Getting the Most Out of Your Unsecured Home Improvement Loan

In order to get the most of your unsecured home improvement loan, there are some things to keep in mind.

Stick to the Budget

Since you get a set amount from your unsecured home loan, you need to know what the cost of your project will be before you apply for the loan. Get estimates from professionals so you can establish a realistic budget. Don’t forget to add some more to your budget in order to estimate any overruns.

Understand the Difference between ROI and Equity

Equity is the value of the home above your existing mortgage. ROI is the return on the investment of the project. Home improvements can increase your equity but may not return 100% of what you spend. If you spend $20,000 for a kitchen remodel, it may only increase the value of your home by about $16,000. Keep these numbers in your mind if you only plan to live in your home for a few years.

Balance Current Needs with Resale Value

You may need to make home improvements that improve your current comfort in your home and personal needs for any daily living. However, personalizing too much can reduce the ROI since other potential buyers may not share your same taste.

Alternatives to an Unsecured Home Improvement Loan

If you are hoping to finance your home improvement projects but don’t necessarily want to get an unsecured home improvement loan, there are other options.

Mortgage Refinance

If you financed your home a while back and the interest rate has gone down for the current market then refinancing your mortgage lowers your current rate and your monthly payments. This allows you to free up some cash for any home improvement projects you want. A cash out refinance allows you to tap into some of the home’s equity.

Lenders will typically let you borrow enough money to pay off the current mortgage and take out some cash, which will usually be up to 80% of the home’s value. You do want to think carefully about choosing this type of financing. Remember, you are using the home as collateral. You are financing short-term costs with some long-term debt, which may add interest and other fees, in addition to the price of our renovation. This may only make sense if you are improving your home in ways that can increase its value.

Home Equity Line of Credit (HELOC)

This is another way to borrow against the current value of your home. Unlike refinancing, it doesn’t pay off the original mortgage. Instead, you get a line of credit up to a certain value of your home. HELOCs come with a repayment period and draw period. During the draw period, which can last 10 years, you spend the money you want in your credit line. Monthly payments cover the interest and a bit of the principal. During the repayment, your monthly payments are usually higher because more is included toward the principal.

Home Equity Loan

With a home equity loan, you can tap into equity again without refinancing. Instead of getting a line of credit, you just receive a lump sum of money. This could make sense if you don’t want to refinance because your mortgage has a low-interest rate. The interest rate is likely to be higher with a second mortgage.

Title 1 Home and Property Improvement Loan

A loan that is federally insured may be a better bet. Especially if you only need to borrow a smaller amount. You can borrow the money unsecured if it’s lower than $7,500. If you need to borrow more than that then you may need some collateral set up.

Credit Card

A credit card can allow you to make purchases if you don’t have the cash upfront. Certain credit cards will give rewards for every dollar you spend. You do want to make sure you can pay off your balance since credit cards usually come with much higher interest rates than other financing options.

Save Up

Saving up so you can pay cash can require patience and time. But if you can pay for your renovations upfront, it eliminates any financing charges. Having a certain amount of cash you can spend makes it easier to stay within your budget.

Final Thoughts

Getting an unsecured home improvement loan can be a great way to finance some improvements in your home. Applying for an unsecured home improvement loan works the same as many other loan types. There are a number of home improvements that you can do with the money from the loan. Some improvements may make more sense than others based on the projected ROI. You can make sure to use the money quickly by doing some research in your area. And determine which home improvements are the best for increasing the value of your home.

The Ultimate Guide To Build A Budget On Low Income

Doing anything with a low income is difficult. Or is it? Having a low income does not have to be the end of the world. If you are struggling, then maybe you just need to learn how to build a budget — and stick to it. Building a budget on low income can be challenging if you don’t know how. So the first thing you need to do is learn about financial literacy and what financial literacy organizations are out there to help you. Once you do that, you will be ready to start learning what a budget is and how you can use it to your own advantage.

How to Create Your Own Budget on Low Income

The first thing you have to do when creating your own budget is gathering information. You need to know how much money comes in and how much money goes out of your bank account every month. This means knowing your income and your expenses. When you know that you are making a budget on low income, you may feel a bit discouraged. But do not worry. You are definitely not the only one in this situation. In fact, you belong to the majority, and if they manage to budget on low income, so can you. So let’s see how to do that.

If you have a set salary, then you have a fixed monthly income, but if you have an hourly job, then your income may slightly change month to month. If you work an hourly job, then you can use an average monthly salary in order to make your budget. Your expenses can be either fixed or variable.

Types of Expenses

Fixed expenses are expenses that occur every month, at the relatively same price, such as rent, gas, electric, water, a gym membership, your Netflix account, and student loan payments.

Variable expenses are expenses that you do not necessarily have every month, or that the total cost is different every month. This could include groceries, eating out, going to the movie theater, or buying a present for your friend’s birthday. These expenses cannot necessarily be planned months in advance, but they can be budgeted; you can — and should — budget some extra money as a buffer, for things like fun — such as going out with your friends — or for emergency — such as emergency medical care.

And Now – Let’s Make That Budget on Low Income

Once you have gathered all the information you need, it is time to start making your budget. Remember, the tips here are just general, but your budget is specific to your wants and needs.

Prioritizing

You need to prioritize what is important to you in order to make a budget that will help you. If you don’t adjust your budget according to your own personal financial goals, then it will be impossible for you to stay on budget and continue to hold yourself responsible. When your income is low, this becomes more difficult, since you really need to focus on the most important things and leave everything else until you see if you will have enough money for it.

Needless to say, utility bills and mortgage/credit card payments should be your priority. After you secured that you have electricity, water, heating and that you do not fall behind with your payments, then comes everything else. Here’s where you want to see how much money you have left in your budget, and what you want to finance the most.

The End Result

You know made a list of your priorities. Paying your bills on time and paying off your mortgage/credit cards/debt is in the top of that list. Everything else after is ordered according to your wishes and needs. Once you know why you have a budget — and understand how it can help you achieve your goals — you will be much more likely to stay on track. Also, don’t forget to keep your goals realistic. Realistic goals allow you to actually see progress. If you have unrealistic goals that you cannot meet, then you co
uld be discouraged from sticking to any parts of your budget.


What is Financial Literacy?

To be able to make the above-mentioned budget and stick to it, it is wise to educate yourself. We mentioned a couple of things you should keep in mind, and we’re going to go over them right now. The first is financial literacy. According to Dave Ramsey, it involves “[helping] people develop a stronger understanding of basic financial concepts…[in order to]…handle their money better.” Basically financial literacy is what you are doing right now. You are here to learn more about basic financial concepts — such as budgeting and debt — in order to handle your money better.

Though there are different ideas of what financial literacy entails, some believe that there are five key components of financial literacy. These key components will help you handle your money better and have an overall healthier relationship with money. The five components include understanding the basics of budgeting, understanding interest rates, prioritizing saving, understanding and being able to recognize credit-debt cycle traps, and identifying theft issues and safety.

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The Importance of Financial Literacy Components

Budgeting is important for many reasons, but one of the biggest reasons is that it helps you keep yourself accountable when it comes to your spending. Understanding interest rates can help you save a lot of money over time, by making sure you don’t end up paying much more than you need to over time. Prioritizing saving is essential to financial literacy because saving now will be a better investment in your future. Now that you know how to budget on low income, you will be able to manage your finances more smoothly and it will definitely help improve your situation.

For instance, you may want to buy the newest iPhone model coming out, even though the last version still works perfectly, but if you save the money, you could end up being to get yourself something much better in the future — such as a family trip.

Understanding the credit-debt cycle traps can help save you a lot of trouble in the future, since it is much easier to ruin your credit than to make your credit better. Identifying theft issues and safety is a big issue in our modern, technological world. Because of all the secure data we store and share online, identity theft is more likely to occur, and thus the safety of your financial accounts can be at risk.

Financial Literacy Charities

This may all sound a bit overwhelming, but you do not have to figure this all out on your own. There are organizations called financial literacy charities that were created to help people like you better understand money and debt. These organizations know that once you understand the basics and have achieved financial literacy, you will be better equipped to make important financial decisions on your own.

If you are a sailor or a family member of a sailor, then you should look into the new MyNavy Financial Literacy app. This app was created just for sailors and their families to achieve financial literacy. Because so many Americans live paycheck to paycheck, the Navy decided to create this app in order to help sailors and their families maintain all aspects in their careers and lives. This app is just a part of a larger program — called Sailor 2025 — to empower sailors.

The Motivation for Budgeting on Low Income

Budgeting can be hard, especially budgeting on low income. If you aren’t very organized, good at math, or patient, then making a budget can be very time-consuming and tedious. On the positive side, once you have made one or two budgets, it will be much easier for you to make your next budget. Over time, once you have your own system in place, budgeting will get easier and easier. Plus, once you have your goals set and your own budgeting method down, it may be as easy as plug and chug.

If you have a low income, then making a budget is very important. It is essential — no matter what your income level is — to not live above your means. Though this is easier said than done, it is much easier done when you have a budget. If you have a better understanding of your financial situation — how much money is coming in and how much money is going out per month, then you can better plan how to spend your money in an efficient manner.

What’s Important When You Budget on Low Income

Budgeting is all about organization and prioritization. In order to efficiently make a budget on low income, organization is key. I personally like to use Excel for my own personal budget. Excel has rows and columns, which can make your budget more comprehensible just because it is visually more aesthetically pleasing. Plus, Excel will do all of your calculations for you, reducing room for error. Prioritization is essential in a budget on low income because it is important to understand that some things are necessary to live and some things are just nice to live with. If your goal is to spend less or save more, then it is necessary to be able to prioritize your spending, so that you can determine what it is okay to live without — and thus take off of your budget.

How to Negotiate Your Bills

While it is important to be realistic when making your budget, you should still know that you have many options and are not confined to just one path. There are some fixed expenses you have every month, but some fixed expenses may be more variable than you think. It is possible to negotiate some of your current bills.

If one of your goals when creating your budget on low income is to decrease expenses, then there are many different ways you can do that. The most obvious options are eating out less, decreasing the number of times per week you buy your morning coffee out — versus making coffee cheaper at home, and not spending as much money per month on entertainment — such as going to the movies, bowling, or attending sporting events. But that’s not all you can do. If you want to decrease your fixed expenses, then consider some of the following ways that you can negotiate your bills:

Cut Monthly Subscriptions

Do you have a gym membership but don’t really go to the gym? Do you have a Netflix and Hulu account but stopped using one of the services months ago when they took down your favorite show? If you are paying money every month for a service you do not use, then that is practically money in the trash. If you have memberships and subscriptions for services you don’t currently use, then consider cancelling them until you are ready to use them again.

Bundle Services

In today’s society it is hard to live without Internet. Whether you use the Internet at home for business, pleasure, or both, you probably don’t want to give up your Internet service. If you also enjoy your cable television programming — which can be expensive, then consider bundling your Internet and cable services. This will allow you to keep both services, but at a lower negotiated price. Pay less for more.

Talk with Customer Service

If you are not ready to get rid of a service yet but cannot continue to afford the service at the current price, then talk to the company’s customer service. Though their power may be limited, their job is to make you happy and give you a good image of the company. Whether this is to decrease your monthly cell phone bill or cable bill, just talking to customer service about your dissatisfaction with the price of the service could lead to a lowering of your monthly bill.

The Untold Tricks to Negotiating Your Bills

What is Debt?

Another important concept to know about when you have a low income is debt. You are probably aware of this and maybe even have some personal experience. That is no surprising since debt is something that most people encounter. But, as someone with low income, you want to have as little debt as possible and to get out of it quickly, so it would not be an additional burden.

The first step to getting out of debt is to understand what debt even is. Of course debt refers to money that you owe to another party — generally a company or lender. But what is your debt comprised of? To find out more about your personal debt, you can use many online financial education websites, that can give you invaluable information. go here. This site will help you connect and organize your accounts, so that, with this bigger picture, you can make better future financial decisions.

You have several options to get out of debt. Budgeting is a great one, but it takes time and practice. Another option is to think about a loan to get out of debt.

How to Calculate Your Debt to Income Ratio

Now that you have a better idea of what your debt means to you, you should calculate your debt to income ratio. Your debt to income ratio “looks at how much money you owe per month versus how much you earn.” Because of this, knowing your personal debt to income ratio could be very beneficial for you. Knowing this ratio can give you a better picture of how you are doing financially. While it is obvious that you should not spend more per month than you bring in per month, but knowing how much of your income automatically goes to debt can help you determine what you can spend the rest of your income on. On average, the recommendation is that your debt to income ratio is less than 43% of your total income.

How to Create an Emergency Fund

Резултат слика за emergency fundinfographic

Besides just getting by from paycheck to paycheck each month, it can be a good idea to also create an emergency fund. As you can tell from the name “emergency,” this fund can be used on anything that is unexpected. For instance, if you have a car wreck and cannot get to work without a car, then you will need a replacement vehicle. If you have an emergency fund, then you are more likely to be able to get the replacement vehicle without incurring as many immediate financial losses.

An emergency fund is also essential to helping you get back on your feet after a medical emergency. You may still need to get a personal medical loan to get you back on your feet, but if you already have an emergency fund in place, then you will not have to get as large of a loan out — which means less to pay back (with interest) in the future.

Of course, creating this fund can be difficult if you are already struggling to make ends meet. How can I put money aside when I can barely cover the fixed expenses I have? This is where budgeting comes in. If you put a small amount of money aside every two weeks, or every month, it will accumulate over time. Instead of eating out, or picking up a coffee on your way to work, pocket that money and save it for this fund.

Is it Better to Pay Off Debt or Get an Emergency Fund?

Whether or not it is better to pay off debt or get an emergency fund all depends on you and what your situation is. There are definitely pros and cons to each option. Though the two options are not mutually exclusive, it may only be possible for you to focus on one option if you are constrained with a lower income. In order to determine which option is better for you, you should weigh all of your options. Do you want to get out of your debt quicker and do not have to think about it anymore? Or do you want to have some money on the side in case something unexpected happens? Maybe you can even do both if you learn how to budget on low income efficiently.

Getting a Loan to Get Out of Debt

If you decide that you want to pay off your debt, but your income is low, you may consider a loan. Yes, loan is another type of debt, but there are some benefits of getting a loan to get out of debtcompared to struggling to pay it off. You could get one of a consumer loan — such as a personal loan —  in order to decrease your debt and increase your credit. This may surprise you, since you typically acquire debt by getting a loan, such as a student loan, but getting a loan can improve your credit. It is even possible to get a loan with bad credit, though a loan based on income will determine how good — or bad — your interest rate will be. Getting a loan can be done in 3 simple steps, so it is easy to see your options.

Conclusion

It can be difficult to budget on low income, but there are many resources available to help get you started. Whether your goal for making a budget on low income is to decrease your overall debt or to save up for your future, it is possible to budget on any income, even to budget on low income. No matter what your financial situation is, you have options. Now it is just time for you to take control of your life and financial situation.

How to Get Personal Loans for a Large Purchase

How to get a personal loan for a large purchase?

You may be thinking of making a large purchase but do not have the financing.  You have exhausted all your savings.  Your friends or relatives are not able to help out with a small term loan.  You, therefore, speak to a financial advisor who tells you that you can apply for a personal loan. Many consumers are turning to personal loans, including personal loans for a large purchase.

The credits have provided a way of meeting financial shortfalls that may arise when one urgently needs money.  It may be to purchase a vehicle, pay medical expenses, and take care of the children’s education, among others. Before you put pen-to-paper, there are certain things you should know. We will explore personal loans in greater detail below.  At the end of it, you will be able to make that final decision on whether you want to apply for personal loans for a large purchase.

What Is A Personal Loan?

The simplest definition of a personal loan is any money you borrow from a credit union or an online lender.  You will need to pay back in fixed monthly payments or installments.  The repayment usually runs between 2 to 5 years.  The lender you opt for will determine the rate, and it is generally within the range of 6% to 36% APR.

Most personal loans are unsecured,  you do not need any collateral.  Other loans require that you put up an asset in case you default.  If you cannot pay, the lender can auction your items. In the case of an unsecured personal loan, the lender will not be able to sell any of your items to recover his money. The flipside is that the interest rate is usually higher then what you will pay on a secured loan.  The lender does this to protect him from incurring losses if you do not pay. Financial experts will, therefore, advise that you go for a personal loan for expenses you intend to settle quickly.  They may not be the best for long-term loans.

You may also refer to personal loans as installment loans because they have a fixed repayment term.  As we have stated above, you will need to pay the loan within a maximum of five years.  You will pay a fixed interest rate, which the lender will let you know upfront.  You receive the money as a lump sum and agree with the lender on what you will pay in monthly installments.

How to Get Personal Loans for a Large Purchase

A personal loan is a fantastic way of getting yourself out of a financial bind.  It is also a solution if you want to buy certain items.  It does not matter whether you are taking personal loans for a large purchase,  or a small one like buying a washing machine.  The loan will provide you with the money you require while giving you sufficient time to pay back.  However, have certain things in mind, and these include:-

Your Credit Score Matters

Qualifying for a personal loan requires that you have a good credit history. The credit bureaus will assign a score, usually within the range of 280- 850.  Those within the range of 725 to 759 have a very good rating.  Anything above that is excellent.  The higher credit score will make your loan cheaper or more affordable for you.  You may find that you qualify for an interest rate of 6.9%, which is below the recommended 11.8 percent.

Anyone with a low credit score may find that the interest rate is not very different from a standard loan.  It could range anywhere from 10% to 35%.  What it, therefore, means is that your monthly installments will be higher.  It may thus become unaffordable, resulting in missed or late payments.  The result is your credit score will continue to suffer, leaving a stain on your credit history.

When you are in the market shopping for personal loans for a large purchase,  it is a good idea to consider the interest rate.  However,  ensure you factor in what the loan will ultimately costume in totality.  Do not talk to one lender only; it will benefit you more to speak to several of them.  If you find one who is offering very low interest rates,  ask them to outline for you any additional fees you may incur.

Also, be careful about the terms and conditions because ignoring fine print may land you in a lot of trouble. When you know your credit score, you will have a good idea of the interest you will need to pay.  You will find online calculators that can help you get an estimate.

Bad Credit Loans

You have decided to set up an electronic store.  You are in the market shopping for personal loans for a large purchase, since you need to set up shop.  Your credit score is not right, and you know you will not be able to qualify for a standard loan.  Do not fret; some lenders deal with bad credit loans. Such consumer loan target people who have a limit on their borrowing options due to their credit history.

Lenders treat bad credit loans like personal loans.  You will get the money upfront, but need to pay back within a fixed time. You can get the money from a bank, credit shop, and credit unions, online, among others.  Other options include loans from retirement accounts, payroll advances, and even borrowing against your life insurance.

Unless it is an emergency, before you apply for a bad credit loan, see if you can improve your credit score.

There are specific steps you can take including:-

  • Ensuring that your credit reports are correct – the credit reporting agencies may make mistakes which could give you the wrong score.  if you find any error,  report it immediately so that they can correct it
  • Have a good understanding of your risk factors, for instance, not having a mortgage, taking on extra expenses to improve your credit score, among others.  with more than 300 risk factors,  you need to do your research well to know what can impact on your ability to improve your credit score
  • Keep up with your the bill payments –  late, or missed payments will stay on your credit report for seven years
  • Pay due consideration to your credit utilization.  It looks at how much outstanding debt you have on revolving credit sources.  experts recommend that you keep it below 30%
  • Apply for a credit card but make sure you use it wisely. proper usage of your credit card shows that you’re able to keep up with the payments and will reflect favorably on your credit report

Pre-Qualified Loans

Pre-qualifying will give you an indicator on the kind of offer you can receive concerning personal loans for a large purchase.  Your lender may do a soft credit check to determine whether or not you are creditworthy.  Do not worry; the pre-qualification check will not affect your credit history.  The lender may ask you for certain information during the pre-qualifying stage including:-

  • Personal details including your social security number,  email,  phone, and physical address
  • What obligations you have e monthly including rent,  student loans among others
  • Your income level
  • Employer details
  • Age
  • Parents names
  • Educational background,  among others

Do note; different lenders will ask different questions depending on what their requirements are.

It is during the qualifying stage that you will know whether or not you can get the loan.  A lender may turn down your application due to one of the following reasons:-

  • If your income level is too low
  • You have a sketchy work history –  too short or none at all
  • A debt-to-income ratio that is above 20%
  • If you get too many credit inquiries, especially those around credit card applications

If you do qualify for a personal loan, it is now time to start shopping loans.

How to Get Pre-qualified for a Personal Loan?

What are the Qualifications For a Personal Loan

The eligibility criteria will depend on the lender and, therefore, vary.  Typically they will look at your income level, credit score, your ability to repay, employment history, age, among others.  A lender will, for instance, be more comfortable giving money to someone who has a regular income source.   It could be a salaried job.  You could also be in self-employment, but with the constant income flow.  Do note a lender can turn down your application depending on who you work for.

Reasons Why You May Need To Take Personal Loans for a Large Purchase

There are various reasons why one may take a personal loan.  Some will take personal loans for a large purchase, while others take it due to specific emergencies.  Whatever the reason, the whole basis for going to a lender is because you need a money at a particular time.  Some of the factors that may make an individual go for a personal loan include:-

  • Personal loans for a large purchase
  • Business expenses
  • Down payment for a home
  • Car purchase or repairs
  • Home Renovations
  • Medical expenses
  • Family-related expenses
  • Vacation
  • Education
  • Legal fees
  • Financing for major appliances or electronic gadgets
  • Personal emergencies, among others

Let us explore some of them a little more below.

Debt consolidation

Debt consolidation refers to putting together high-interest loans and paying them off at once.  Of course, it will require that you have a significant amount of money to be able to do so.  In this case, a personal loan will make a lot of sense.  Make sure that the loan you take has a low-interest rate so that you do not find yourself back in serious debt.

Medical Emergencies

If there is one thing that is very difficult to predict is a medical emergency.  You never know when you or your family member may need urgent medical attention.  A personal loan can help you sort out the unexpected medical bills.

You can also opt to apply for a personal loan for an elective procedure.  Such include laser eye surgeries, dental implants, plastic surgery, among others. Insurance companies will more often than not pay for such procedures.

Family Events

Certain events within the family would require money. If you, for instance, have a wedding coming up and do not want to depend on family members, you can apply for a personal loan.

You may also want to take your family for a vacation, but you do not have enough money as savings.

Relocation

You may be relocating to a different town or city for whatever reason.  There are individual costs associated with moving. Such include paying a deposit for your new place, hiring a moving van, paying for utilities among others.   If you do not have enough money put aside, then you will definitely need to consider applying for a personal loan.

Rent Payment

Despite your best intentions, sometimes you may not be able to make rent obligations.  A personal loan will, therefore, provide you with a level of relief as you wait to sort out your finances.

Setting up a Business

Many people dream of owning their businesses but find that their finances do not allow.  Taking a personal loan will help you with some of the setup aspects of the company.  You may need to buy special equipment, and this will, therefore, be the best time to take personal loans for a large purchase


See If You Have Other Options

Personal loans for a large purchase will give you a quick way of getting what you need.  However, as we have stated above, personal loans have high-interest rates. You may want to exhaust all other options before you apply for one.  Such choices include:-

  • Applying for 0% credit card – depending on your credit score, you can apply for, and get a credit card, which will charge 0% interest on purchases within a specific timeframe.  The timeframe is usually within a year or slightly longer depending on your negotiation skills
  • A secured loan will give you a better interest rate than an unsecured loan.  You will, however, need collateral, for example, business equipment, a car or a house.  If you own the latter, you can apply for a line of credit or a home equity loan which is a slightly cheaper option than a personal loan.
  • If you can get someone with a good credit history to co-sign your loan, you may be able to get better terms.

Do Not Ignore the Fine Print

We cannot reiterate this point, and you will find us referencing it several times in the article. You must understand all the terms and conditions for the loan. Different lenders have different requirements, and you need to have a proper understanding. Be especially watchful for the following:-

  • You may come across a lump sum and wish to settle your loan early.  Some lenders will charge you an exit fee or prepayment penalty while others will not.
  • Some lenders will insist on automatic withdrawals from your checking account. Setting up a low balance alert is a good idea so that you do not overdraw the account.  Remember, your bank may charge you an overdraft fee, and you do not need additional expenses at this stage.
  • Let the lender tell you upfront what the total cost of the loan will be. You may find hidden fees you did not factor in when taking the loan.
  • Your lender should also make reports to the credit bureaus  as it will help improve your credit score
  • A lender who is flexible with payments will make it easier for you to make the payments. Very rigid one will penalize you for late or missed payments.
  • If you are consolidating your debts, you should look for a lender who will pay your creditors directly

Applying For The Loan

Once you decide on your lender, it is time to apply for the personal loan. You will need to provide relevant documentation, including identification, email verification, and proof of income. Be ready for a credit check before getting final approvals. Getting your personal loans for a large purchase will typically take one week.

You can shop for a loan right here, right now. And you know that Loanry brings you ONLY reputable lenders. So, if you’re interested to see whether you qualify for a loan with one of our lenders, put in your information below and you’ll get offers in seconds.


Mistakes to Watch Out for When Taking a Personal Loan

You have chosen to take personal loans for a large purchase.  Also, you have already started your research and are in the process of deciding on the lender. You need to be careful, though,  there are certain mistakes you could make that could cost you.  We will highlight them for you below.

1. Not shopping around for the best lender.

There is an unquestionable comfort in familiarity.  You may feel that you only want to borrow from the neighborhood banks, or from those you are comfortable with. What you neglect to do is to find out whether their rates and terms are favorable for you.  You need to expand your thinking to incorporate online lenders and credit unions. They usually have better rates than local banks.

Try and establish a relationship with the lender because trust is a vital element when it comes to money.  Do not sign any blank documents; it may be a scam. There are so many options out there so you need to look at your situation and find the best one for you.

2. Not Knowing Your Credit Score

We have already highlighted the importance of knowing your credit score. You do not want to apply for a loan only for the lender to reject you. Also, take time to go through the eligibility terms.  If you keep on applying and never get an approval, it will impact on your ability to get a loan in the future.

3. Not Negotiating the Terms

Think about applying for a personal loan in the same way you would when buying a particular item.  No one says you have to accept whatever terms the lender offers you upfront. Play hardball and negotiate so that you get the best rates possible. And yes, the lenders have factored in that you may want to negotiate, so do not just settle for whatever they tell you.

4. Overextending Yourself

Taking personal loans for large purchase is expensive. You may borrow more than you can comfortably payback.  Have it at the back of your mind that you will need to pay interest and any other additional costs. You will find that what you are paying back is significantly more than what the lender gave you.

5. Not Reading the Fine Print

We have discussed this at length above, under no conditions should you sign that form without reading the fine print.  There is no shame in spending some time to understand the documents first before appending your signature.

6. Not Having a Good Reason as To Why You Are Borrowing

If you are taking personal loans for a large purchase, for instance for a business, it makes sense. If you are, on the other hand, just taking a loan because it feels good to have money, then don’t. Only borrow when it is essential, and you can not do without the money.

7. Keeping Your Family in The Dark

Yes, it is a personal loan, but you should let your spouse or close family members know when you are taking it. Not being able to meet the loan applications will have repercussions on yourself and those close to you.  If for example, you take personal loans for a large purchase but are not able to pay back.  The lender could seek legal redress to recover the money from you. Imagine how devastating it can be when your spouse to learn about the events only when the court processor serves you.

Final Thoughts

There are several reasons for an individual would want to take a personal loan. Taking personal loans for a large purchase is one of them. Before you apply for the loan, you need to take into consideration all the factors we have shared above.  Remember, you will need to pay back this money and so you need to be clear about the reason why you’re taking it.

Work with lenders who are trustworthy, and who have your best interest at heart.  Understand all the terms and conditions, because they will impact on the amount you finally payback. Most importantly, have a plan in place on how you will settle the debt.  Since you already know the monthly cost upfront, it will only make sense for you to plan yourself accordingly. Late payment of missed payments will impact on your credit score.  Poor credit score way ultimately results in an inability to get loans in the future.

Should You Finance TV and Audio Equipment? Turn off!

The answer to this question is really a personal one. There is no one size fits all. You might have people tell you that it is a bad idea to finance TV and audio equipment, but that is not always the case. Handled responsibly, any kind of debt can provide benefits that help you down the road, like building your credit. At the same time, going into debt for the simple sake of going into debt is not usually a good idea. But there are still many good reasons to use a loan. Should you finance TV and audio equipment? I hope that by the end of this article, you will have enough clarity to answer that question for yourself.

How Do You Know If It Is Smart to Finance TV and Audio Equipment?

Whether it is smart to finance TV and audio equipment really depends on you and your financial situation. If you can afford to pay for it outright, that would be a better option. If cannot pay it outright but can easily afford the payments, you should be okay. On the other hand, if you are currently fighting every month to pay your rent and keep your lights on, I am going to say that it probably is not a smart idea.

Take a look at your financial situation on a very honest level. Is your current income taking care of all you need? Do you have more important financial goals, like a new car or a vacation? Does the idea of financing this equipment make you nervous?

Let’s simplify this answer a bit. If financing TV and audio equipment will interfere with feeding your family, paying your utilities, keeping a roof over your head, or any other drastic thing, stop where you are. Do not pass go. No amount of technology is worth your or your family’s well being.

If you can make payments easily, it really comes down to if you want to make the payments. You have the power to choose one way or the other. I have to admit, there are good reasons for getting a loan, but you need to look at the circumstances you are in. Hold on, though. Do not jump up and run to the store just yet, or give up on your equipment. Let’s make it through the whole article first.


Saving vs Financing

If there is one thing I miss seeing in the world, it is patience. When I was a kid- which really was not that long ago- we had to wait for things. There was nowhere near as much instant food available then. If we were hungry, we had to wait until the food was cooked. If we wanted to see a movie, we had to actually drive to the video store and hope that someone else had not rented it.

Video tapes and cassette tapes were the biggest entertainment, both of which had to actually physically rewind. I learned patience because I wanted to watch my favorite movie over and over, so I would sit in front of the VCR and listen to it rewind, just waiting to hear that click that meant it was through.

Oddly enough, people had to be even more patient in my grandparents’ day, and their parents’ before them. Over all of these years, amazing technology has been created. It simplifies life, brings cures and treatments to people with health problems, and so many other incredible things. It seems, though, that as it came into our world, patience ran the other way. TV and movies are available on tiny devices that we can talk on. Microwavable food takes up a huge section in the grocery store. The only places you seem to find yourself waiting now are in checkout lines and doctors’ offices.

This is the problem

We have been conditioned to expect instant gratification. We want what we want and we want it now. Is it any wonder that there is such a huge amount of consumer debt while the majority of adults have no money saved? We have been taught to worry about the here and now, not the future. Sadly, this is leading to a lot of financial hardship. If we can relearn, as a whole, to save money, to only spend when we have saved enough, we can begin to change our little parts of the world- and our families’ futures.

The question now is whether you can be patient or not. If you can be patient and save the money instead of choosing to finance TV and audio equipment, it will be extremely rewarding. After working and putting money away for something you desire, and then finally bringing it home 100% yours is an awesome feeling. Knowing that you really, truly own it feels so much better than knowing that you have to start making payments in a week.

How to know you really want something

I have also found that when people work and save for an item, they sometimes discover that they really do not want that item. The original desire for the item was really just an impulse or a reaction to something. After they have had time to think about it, the excitement wears off. Suddenly, it is no longer a priority because it really was not important to them in the first place.

What to expect if you choose to finance

There are other downsides to financing besides the lack of internal reward for working hard and buying what you want. If you choose to finance TV and audio equipment, you will be paying interest. Even though there are very good reasons to get a loan, you will still be in debt. Not to sound overly dramatic, but debt in any form is a burden you must bear. Until the debt is paid off, you are basically enslaved to it.

Think about it like this: When you save the money to purchase your TV or audio equipment, you do all the work upfront. Before you bring it home, you work hard, save, and look forward to the day you get to make your purchase. It is an exciting time. When you finally make the purchase and bring home your equipment, you know that there is no work left to do for it. You have paid all that you need to pay, so now you can actually enjoy your next off day.

Now, imagine you finance TV and audio equipment. You go into the store and pick out what you want. You get it home and set it up. Maybe you enjoy it for a couple of days, but before long, reality sets in. Before you went into the store, you had some freedom. Now, not so much. For the next six months, 12 months, or however long your finance term is, you will be making payments. Your mind begins to associate your equipment with stress and poof! The enjoyment is gone.

Is It That Serious?

I want you to ask yourself one simple question: Is it that serious? I know that some avid sports fans are going to want to yell at me for this question, and maybe a few others, but that is okay. It is an important question that can put all of this into perspective. Is your need or desire for TV or audio equipment serious enough to be in debt for it? Is it serious enough to put other needs and wants to the side while you make monthly payments?

For some people, the answer will be, “Yes,” and that is completely okay. I merely want you to consider the gravity of the decision to finance TV and audio equipment. If you are willing to pay that price, that is your choice. Just keep in mind that there are downsides of loans. Others may have decided that it is not that serious, but they still want to watch their stuff or listen to their music. The good news is that there are some alternatives to having to finance TV and audio equipment:

Mobile Device

If you have a smartphone, tablet, or laptop, you have the ability to watch almost anything that you watch on your television. In addition to many TV shows being on Netflix and Hulu, many channels also have a website and an app. This includes kid’s channels, as well.

Cheaper Options

I realize that some cheaper or used items may not be the best, but you can find TVs and audio equipment in a lot of places. Thrift stores constantly have TVs. Pawnshops often have loads of electronics and music equipment for a fraction of the original cost.

My father has been a musician my entire life. I cannot tell you how many times he came home excited to tell us about the guitars he would find at pawn shops. I had not learned the differences in brands at that time, but his excitement told me that it was a great deal. To this day, he still finds treasures at pawn shops and tells us all about them.

Other than thrift stores and pawn shops, consider looking online. Facebook has the Marketplace now where you can find items from local sellers. Craigslist is another option. You might also just try Googling the product. Often, if you scroll past the first few search results, you can find a website that offers some really good discounts.

Where to Finance TV and Audio

If you choose to get a personal loan instead of retailer financing, you have many loan places to choose from. There is always your bank if you have one, or local community credit union. While these can be great options, it sometimes takes a few days to get approved.

Online lenders are often the easiest to apply through since you can apply for multiple ones at one time, apply at any time of the day, and typically get results in minutes or hours. Even better, there are lenders online for all credit types. So instead of calling or driving around town for someone to accept your credit score, you can easily do so online. For those who feel that they cannot wait for another second for their new TV or audio equipment, there are fast loans available, too. Taking out a loan for a larger purchase can be a good idea if you weigh all the options.

Here on Loanry, you can find reputable lenders and consider applying for a loan with them. You can even put in your information in the form below, and get offers from lenders who would potentially lend you money within seconds. So if you are interested in a loan, start here:


What About Using a Credit Card?

A credit card or a loan? If you have a credit card with the available credit, you might be tempted to charge your equipment and be done with it. This may not be your best move, though. Any time you cannot repay the charge amount within a month or two, you should opt for a personal loan instead. Otherwise, you will likely pay more in interest than you did for your equipment, and it typically compounds monthly. It is not a pretty look.

Personal Loans versus Credit Cards: What is Better?

How to Save for TV or Audio Equipment Without Waiting for Years

Yes, it takes time to save up some money, but there are ways to speed it up. First, you need to pick out the equipment you want and determine the price. Let’s imagine you find a huge smart TV that you want in your living room, and the price is $1,000. Take a look at your budget and decide how much you can realistically but to the side every week without going without necessities. For our example, we will say $20 a week. If you only save that amount, you will have the full cost of the TV in 12.5 months.

Since you decide you do not want to wait a year for the TV, you need to set a realistic goal of when to purchase it. Now, I am all for dreaming and pushing my boundaries, but if you are not willing to hustle enough for $1,000 in one month, do not set one month as your goal. Ask yourself just how hard you are willing to work for your TV, and set your time goal around that.

If you decide you want to do it in three months, you will need to save about $334 per month. You have already determined that you can save $20 per week from income, so that is $80 to $100 per month, depending on how many weeks are in the month. If you put $80 up from income, that leaves you with $254 more to save each month- and that is totally doable. Here are some ideas to get you going:

Yard Sales

I suggest yard sales all of the time because I know how lucrative they can be. Dig out some things you really no longer want or use- when is the last time you actually went bike riding?- and sell it all. I have known people to make as little as $50 and as high as more than $500. You might get a nice surprise and end up with all of the money you need in one weekend just from yard sales.

Odd Jobs

If you ask around, there are probably at least two people close by that need some help with things like cleaning out garages and sheds, yard work, babysitting, pet sitting, house cleaning, house painting, window washing, or even cleaning gutters. Ask around. A few odd jobs can help pad your savings pretty quickly.

Double Check Your Budget

Is there anything you can cut back on while you save for your TV or audio equipment? If so, rework your budget until you make your purchase.

Personal Consumer Loan vs Retailer Financing

You might find that the retailer will allow you to finance your TV and audio equipment through them. Is this a better idea than a regular consumer loan? Well, that depends on the differences in the interest rates and the terms.

I will say that on a regular day, going through a lending service on your own will probably be the best idea. Sometimes, though, the retailer is able to offer some excellent financing options that include 0% interest for a set period of time. Obviously, if you can choose a loan with no interest over one with interest, go for the one without.

Be sure, though, to ask questions and read your contracts. When I worked at a mattress retailer, we had financing options from two lenders. One was great for those with good credit because they were the ones who would receive the 0% interest. The secondary lender was intended for those with bad credit. On the one hand, it was great that more people were able to get a quality mattress. On the other, no one was reading or paying attention to the terms.

Getting a loan with bad credit

One day, a previous customer of a coworker had come in looking like her head was about to explode. As I approached her, she started yelling about her payments. After a moment, I was able to calm her down enough to find that my coworker had not broken down how that secondary lender worked. They offered 6 months same as cash, and most customers were okay with that. Why? Because they thought that interest would simply start after those six months.

The truth was that if you did not pay the full amount in that six months, the interest would be calculated against the entire amount borrowed and compounded monthly. It did not matter if they had paid the loan down, they were still being charged full interest. If you accept any type of financing, read the fine print and ask as many questions as you need to understand the process.

Stay Away from Rent to Own Shops

There is a great temptation calling to consumers with bad credit or no money: rent to own shops. My city is not very big. But there are still five of these stores almost in throwing distance of one another. They throw out advertisements telling you how little you can pay each week to own the things you want. Sometimes, they will hit you with a double- whammy by giving you “the first week free” or “$10 pays your first week”. Or, my favorite, “6 months same as cash”. It sounds too good to be true- because it is.

There is nothing cheap about these places and their items. Most of them are increased to three times their actual price. The same as cash price is basically impossible to pay, unless you are drowning in money. If that is the case, you would not have to shop in a rent to own store.

I really could go on about these places all night, but I will stop there. There are consumer loans out there that offer good terms. These are not those loans. Bottom line: stay away from them if you value your money at all.

Conclusion

I hope that this information has helped you come to a decision about financing your equipment. If you really think through your situation and weigh out the pros and cons of borrowing, you should be able to make the right decision for you. If you choose to finance TV and audio equipment, be sure to make all of your payments on time so that you do not mess up your credit. Also, look for a reputable lender and remember to read all of the details before signing any paperwork so there are no surprises.

Are Personal Loans Considered Taxable Income?

There comes a time in all of our lives when we need extra money fast. While it may be easy to get a consumer loan, you probably have some questions. Since you get money when a lender approves you for a loan, you may wonder are personal loans considered taxable. The short answer is no, a personal loan is not taxable income and you do not have to pay income taxes on that loan. Continue reading to find out more.

What Are Taxes?

There are several types of taxes. But let’s start with the type that concerns us. What are income taxes? Income taxes are taken out of every one of your paychecks. Your employer takes the money out of your check before you ever see your money. This makes it easy for you so that you do not spend the money before you pay your taxes. If you are self-employed, you are responsible for paying your own taxes. Income taxes varied depending on how much income you make and typically the percent of taxes you have to pay increases with how much income you have. There are taxes other than income tax that you have to pay.

Most states, with the exception of Delaware, have sales tax. This means that you pay a tax on items you buy. The amount of tax and the items that are taxable vary from state to state. You pay this tax at the time of purchase.

If you earn interest on money in a savings account, that is considered income, so you pay taxes on the interest. You have to claim the interest on your annual tax return.

If you own a house or other property, you have to pay property tax on it. This is usually paid in your monthly mortgage payment. That money is held in an escrow account until the annual payment is due. Or you could opt to pay this out of pocket annually on your own.

At the time you purchase a car, you must pay a special tax on the vehicle. You can pay this upfront, or have it rolled into your monthly payment amount.

What Are Personal Loans?

A personal loan has many names, such as fast loans and unsecured loans. You can even obtain unsecured personal loans online. No matter what you call it, the basic premise of a personal loan is a lender lets you borrow money. The lender can be a bank, credit union, or even a family member. They allow you to borrow a certain amount of money with your promise to pay them back with a regular monthly payment. The lender charges interest on the money you borrow as a fee for letting you borrow the money.

Typically the repayment period is anywhere from three to five years. For a typical personal loan, the monthly payment remains the same each month. Since you are receiving money, some often wonder are personal loans considered taxable income? Since you are repaying the full amount of the loan (and then some), personal loans are not considered taxable income and you do not have to pay any type of taxes on the money you receive.

Do Personal Loans affect your Tax Return?

What Is Considered Income?

Taxable income is any money that you receive from earned or unearned income. Earned income is money that you receive for work or other services provided. This includes wages, fees, and tips.

Unearned income is a little trickier and not all unearned income is taxable. Types of unearned income that could be taxable are lottery winnings, bonuses, profits earned by selling assets, and stock dividends, just to name a few.

Keep in mind that taxes are paid on your gross income. Gross income is the amount of money you earn before any money is taken out. Net income is the amount of money that goes into your bank account after all deductions and withholdings. You may still be wondering if personal loans considered taxable income, and they are not.

Do I Have To Pay Income Taxes On A Personal Loan?

For the most part, you do not have to pay income taxes on personal loans. There is one exception when a personal loan is taxable. The typical way a personal loan works is you borrow the money. Then you repay the money on time with interest. This scenario does not consider a personal loan to be taxable. If you the personal loan is a cancellation of debt, or the lender forgives the loan, this means you do not pay back the money. In this instance, the personal loan you received is considered income and you have to pay income taxes on the amount you borrowed. If you were wondering are personal loans considered taxable, this is one of those situations when they are.

What Happens If I Do Not Pay My Income Taxes?

You should be clear on one thing, the Internal Revenue Service (IRS) will get their money. You should make every effort to pay your taxes. That said, IRS really wants to work with you to ensure you pay your taxes. It feels like they are working against you, but they really are not. It is key to understand what is considered income and the amount on which you owe taxes. You should know if personal loans considered taxable income.

The most important thing is to file on time. IRS hits you with heavy penalties for not filing on time. If you owe money, you should pay it. If you cannot pay it all at one time, set up a payment schedule with IRS. They are willing to work with you, especially if you show intent to pay. If you do not pay, you are hit with penalties and interest charges. The interest accrues every day until you pay them back.

Can I Use A Personal Loan To Pay My Taxes?

You can use a personal loan for just about anything you want. So, yes, you can obtain a personal loan to pay your taxes. However, just because you can does not always mean you should. You still need to make sure it is the smartest decision for you. Since as long as you pay them back IRS does not think personal loans considered taxable, so you will not have to pay additional taxes. You should determine how much you will pay to the IRS in fees and interest.

You should also consider how much you can pay them per month and for how long before your debt to them is paid. Once you know those numbers, you can determine how much you would pay in interest for a personal loan. Once you know that, you can determine your monthly payment. You can compare the numbers for both and determine which one is more favorable for you. You may decide that a personal loan is a way to go. This is only true if you can afford to make the monthly payments.

Does My Credit Score Impact My Taxable Income?

No, it does not. Your credit score does not impact the amount of income taxes you pay. It is based solely on the amount of money you earn. IRS does not think personal loans considered taxable income. The IRS does not particularly care about your credit score. They are only concerned about getting their money from you. The good thing about this is the IRS does not check your credit score when they set up a payment plan with you. Your credit score does not impact the fees or interest that the IRS charges. Another point of note is that the IRS does not report anything to credit bureaus, so setting up a payment plan does not lower your credit score.

Why Does My Debt To Income Ratio Matter?

Your debt to income ratio makes a difference when it comes to matters of obtaining credit, or loans. It does not particularly impact income taxes, or how much you have to pay in income taxes. It does come into play if you are considering obtaining a loan to pay any taxes that you owe. Just as a reminder, IRS does not think personal loans considered taxable income, so you do not have to pay income taxes.

Let me give you just a little bit of information about debt to income ratio, so you understand how it is determined. Your debt to income ratio looks at how much money you owe per month versus how much you earn. It is the amount of your gross income per month that is for rent/mortgage, credit cards, and other debt. Your gross income is what you earn before taxes. Most lenders want your debt-to-income ratio to be less than 43 percent of your income.

Are Taxes Different For A Small Business?

Taxes for a small business are different from income taxes for an individual. Depending on how your business is organized determines what types of taxes you are paying. When there is more than one person in the business, it needs to be recognized as a partnership. However, to make this simple, I am going to focus on taxes for someone that is in business by himself.

In this case, you are considered a sole proprietor. The rate you pay is the same as the personal income tax rate. As with an individual, IRS does not think personal loans considered taxable income. You do, however, have the ability to make different deductions when you are a sole proprietor than when you are an individual. There are some additional forms that you must fill out when considered a sole proprietor. The Schedule C is one of those forms.

What Is The Schedule C?

While the Schedule C may seem daunting to you, it is one of the most useful tools in your arsenal as a sole proprietor. It is the front and back of one page. This is the worksheet that allows you to itemize all of your expenses and deductions associated with your business. It is basically your total income minus your expenses and that equals your profit. You should keep your receipts and track any mileage that you plan to claim at the end of the year. At the most basic level, everything you buy for your business and every training you attend may qualify as a deduction.

Can I Avoid A Personal Loan?

Even though the IRS does not think personal loans considered taxable income, they still may not be right for you. Some of you may be thinking, I really do not want to take on any more debt. Or you may not be able to afford any more payments. In those cases, avoiding a personal loan might be best for you.

Let us talk about some other options for just a few moments. You could try to save the money you need in an effort to avoid a personal loan. If you cannot pay your taxes, you can set up a payment plan with IRS so that you are paying them a regular monthly amount. This does not require you to take on any more debt. It does not require a credit check and has no impact on your credit rating. You could also borrow money from family or friends. This also will not impact your credit score and they may not charge you any interest, so you can save some money.

Do I Really Need A Budget?

Another big thing you can do to avoid a personal loan is create a budget. I already know what you are thinking. No one likes that word. People think of a budget as a bad thing. I encourage you to look at it as a positive thing. It puts you in charge. You get to decide what is most important to you and work towards those goals. It is a way to take a hard look at where your money is going and make positive changes. This is your chance to see that you are still paying for a gym membership that you never use. You can take action to cancel that membership.

You must create a list of all of your expenses. Be sure not to leave any one of them out. This way you can see how much money you are spending each month and how it compares to how much money you earn each month. You might be surprised by what you see. When you do the math, you can determine how much money you have left over each month. Keep in mind, IRS does not see personal loans considered taxable income.

 Conclusion

People always get scared when it comes to taxes. They really are not that scary. There are some key points to help make filing taxes as easy as they can be for you. Make sure you file on time and get assistance when you need it. I have already told you that the IRS does not think that personal loans considered taxable income, so you do not have to pay income taxes on them. There are many other details when it comes to taxes that may be helpful to you for saving yourself from paying a higher amount of taxes.

In addition, when you have to pay a large amount of taxes, you may want to consider a payment plan with the IRS. You could also consider taking out a personal loan to pay off the taxes. This way you do not have to deal with the IRS. Each situation is different. You should make sure that no matter which path you go down, it makes the most sense for you.

Can I Use a Personal Loan to Pay for Major Appliances?

Just a few months ago, I had what was likely the worst two weeks of my life when it comes to appliances. One minute, we are going along in life and everything seems ok. The next, my oven suddenly stopped working. This was terrible for me for a couple of reasons:

1.) I love to cook and bake, and
2.) with 6 mouths to feed, I have to cook to save money.

Needless to say, the lack of oven threw me for a loop. Personal loan for appliances comes to mind. But wait…

As if that was not enough, two days later my hot water heater stopped working. The following week, my dryer stopped and my main air conditioner went out. It was insane in my home. And while I could normally think through things enough to figure out how to replace something, I had four major appliances to replace at one time.

Have I figured it out?

Burning hot and overwhelmed, I honestly had no idea what to do. I was not even sure where to begin. All of these appliances played a huge role in my home, but I did not have the money to replace any of them. What does one do when appliances break down with no warning? I wish I could tell you I have it all figured out now, but that is not true. What I do have is some progress and a plan, as well as some other ideas to share with you. I hope you are not facing the need to replace multiple appliances like me, but whether you need one major appliance or ten, these steps and ideas can help.

Assess the Situation with as Much Honesty and Clarity as Can Be Found

Man with a check list icon

After the shock, the overwhelm, and the well deserved pity party stopped, I gave myself a pep talk. It went somewhere along the lines of, “Put your big girl pants on and get to work. No one is going to just hand you what you need. Figure it out.” From there, I went to my white board and started really analyzing my situation. I asked and answered the following questions:

Are all of these major appliances necessary for survival?

Let’s be honest, none of them really were as people have lived without them all before. We have become conditioned to believe these items are necessities because they are the norm. So first, I let myself breathe a little. However, I happen to like all of these non-essential luxuries. I like hot showers. Also, I like to pull my clothes out of the dryer smelling like my favorite fabric softener. I love to cook, and I really hate to sweat in my own home. No, they are not necessities, but I want them back, which leads to the next question.

Is there a tolerable and affordable alternative to any of them at the moment?

As much as I love my freshly dried clothes, there is really no reason I cannot hang clothes to dry for the moment. For that matter, there are about 20 laundromats in my area if I just really want to dry them for now. And since the stove eyes still worked, I was not totally without being able to cook, and a toaster oven lets me bake a few things. As a nice surprise, my sister gave me a rotisserie machine that she was getting rid of, which was really awesome since she did not even know my oven was not working. Between my toaster oven, rotisserie, and stove eyes, I can still cook a good meal.

As far as the air goes, it is definitely a priority in this Alabama heat. The inside of my home stays hot enough that I probably do not really need an oven, so we had to get the air conditioner working. And the hot water. It may be hot but I still do not want an icy shower. After I determined that these were the top two priorities, I moved on to calculating the costs of each and planning the purchases. Since I still did not have enough in savings to replace these two appliances, I had to consider other means, and that included a personal loan for major appliances.

Reasons People Get a Personal Loan for Major Appliances

Since personal loans can be used for pretty much anything, it is not odd to consider on for major appliances. The problem is that most people jump into a personal loan for major appliances without thinking it through or really needing one. Quite often, this is either because they are desperate or, like I mentioned earlier, are convinced that the appliance is a necessity right at that moment.But of course, there are times when there are good reasons for using personal loans. 

As you can see from my story, necessity is relative to the individual’s or family’s opinion. If you deem an appliance as immediately necessary, no one should try to convince you otherwise as priorities are different in every home. If you choose to get a personal loan for major appliances, you will be in good company as many others do the same. Make sure you assess the situation and find your reasons for getting a personal loan. 

The Many Reasons to Use A Personal Loan

 To Get a Loan or Not to Get a Loan…

Getting a personal loan for major appliances is a completely personal choice- along with your spouse or significant other, of course. The key is really to just think it through. Jumping into any kind of debt without careful consideration is not a good idea. Also, some things are not worth financing. When making the decision, you should really consider your current budget. Can you afford an extra payment every month? Many people’s budgets are stretched to the max already. Adding in another payment would cause some severe problems. This does not necessarily mean you should give up. There are advantages to getting a personal loan. That loan just might help you in more ways than one if you make wise moves.

Things to consider

For instance, if your budget is stretched due to other debts that you are currently repaying, you might consider getting a loan that would consolidate those debts and pay for your appliances. This type of move could let you breathe while making lower payments with lower interest. As I said, you need to be wise with this, so before you make this move, be sure that the interest rates of the personal loan and the payments for the loan are lower than what you are paying now. Otherwise, you will continue your debt cycle.

Pros and Cons of a Personal Loan for Major Appliances

As with all things in life, there are pros and cons to getting a personal loan for major appliances. On the positive side, you can replace your major appliance very quickly. Instead of paying it all up front, you get to spread the cost of the appliance over a number of months or years, depending on the specified repayment terms. The interest rates of a personal loan for major appliances are generally much lower than credit cards and other options, so you save some cash. On top of all of those benefits, if you make your payments as you should, you will improve your credit.

The downside to a personal loan for major appliances is simply having a debt you have to repay. Debt interferes with budgets and usually puts financial goals on hold. And, even with low interest rates, you are still paying interest, and possibly fees. Also, if you do not pay your payments as you should, you will mess your credit up- something nobody needs. Repaying debt can be a real struggle.

Alternatives to a Personal Loan for Major Appliances

Before running to your local lender, take a step back and consider these alternatives to getting a personal loan for major appliances:

-Family and Friends

I know not everyone has family or friends that can or will help them out, but it never hurts to ask. Maybe they cannot front you the cash, but they just might be getting rid of what you need. They also might know someone who is selling what you need for cheap. No, they will not be brand new, but if they work, you can utilize them until you can save the money.

-Credit CardsCredit card icon

Credit cards can be used for major appliances, if you have enough available credit, but it might not be the best choice. Some credit cards charge higher interest rates than lenders do, and the interest compounds every month. On the other hand, if you are in an introductory 0% interest phase, the credit card would be your best bet provided you pay off the appliances before the introductory phase is over.

-Work for It

Of course, you can always work to pay for your major appliances. Pick up some extra shifts or a second job. Here is another secret for you: if you can find a job waiting tables somewhere, you can make it pretty quick. If you go to a restaurant that keeps a really steady stream of customers and take good care of your tables, you can make hundreds over one weekend. It is not a job you want to do forever because it is a stressful job and can break your body down if you are not careful.

However, picking up a couple of shifts on the weekends for a while can help you reach a lot of your financial goals quickly. When I went through my appliance meltdown a few months ago, I was tempted to go back to serving myself. I knew from experience that I could have the cash in my hand to pay for all four appliances in three weeks or less. As my health is one of my top priorities, though, I opted to focus my attention in other areas.

-Thrift Stores/Second Hand StoresStore icon

If you did not know, here’s a secret for you: thrift stores and second-hand stores are awesome. You can find all kinds of affordable goodies in them. Of course, you want to clean them up when you get home, but if they work, cleaning is a small price to pay for an affordable appliance. With the money you save, you can pay a teenager or college student $20 to clean it for you if you want.

Do not just look at thrift stores, though. Ask around for little family-owned businesses in your area. We have one close by that fixes up old appliances and resells them for affordable prices. Sometimes, if they have the space for it, they will take your old one to fix and resell while giving you a discount on your new ones. Check around for similar stores in your neighborhood.

Where to Get a Personal Loan for Major Appliances

You have a lot of loan places you can utilize to find a personal loan for major appliances, other than traveling all over your city. The following are some of the categories:

-Online Loan Places

Applying for fast loans online is extremely simple and convenient- and totally free since you do not have to spend gas money. You can find online loan places to help you with your situation. There are lenders online for all credit types and all borrower situations, though some may require some collateral from you if your credit history is unsatisfactory. One of my favorite parts of doing anything online is that I can do it at anytime: while I am sitting at my kids’ dentist appointments, while I am finally getting to catch up on the latest episodes of The Blacklist and Hawaii Five- O, or when I have been working all day and finally have a moment at 3 a.m. The accessibility and convenience are two great reasons you should consider applying online. You can do so right here on Loanry. Here is a list of reputable lenders you should consider, and if you put in your information, you can instantly see if you qualify for any of their loans:


-Retailer Financing and Store Credit Cards

Another great place to find a consumer loan is through the retailer themselves. Major retailers are often connected with lenders that can help get you the items you need. Like credit cards, you have to pay attention to the terms and interest rates here. At times, retailer financing can be your best bet because they run specials that offer 0% interest for certain time periods, even up to five years.

Here is the secret though: those lenders offer that promotion to get you to borrow, and you will get that time period without interest.  However, they feel comfortable offering such long period interest-free because most consumers do not pay the financing off in that time period. If you take advantage of an offer like this, pay more than the required payment each month so that you can pay it off during the promotional period.

Additionally, many large retailers have store credit cards. When you find the appliance you want, look around for a retailer that has financing available. Compare the interest and terms to that of your credit card and a personal loan for major appliances to choose the best avenue of financing.

-Banks and Community Credit Unions

Banks and credit unions are always an option, but banks tend to have more stringent requirements for loans. Try your local credit union as they are dedicated to helping their community as much as possible. One way they do this is by lowering the requirements of loans, so they are an option for more people. You might find that you can get a good loan with great terms from your community credit union.

Where to Avoid Getting New Appliances

What I am about to say is probably the most heartfelt thing I can tell you. For no reason whatsoever should you step close to rent-to-own places. Absolutely avoid them at all costs as they are no better than title loans and payday loans when it comes to a debt cycle. I learned my lesson the hard way. I was a young clueless nineteen-year-old. Since I was waiting tables and had few responsibilities, I had money to burn.

Not all recommendations are great

One day at work, I mentioned wanting to get decent furniture for my apartment. A coworker suggested I go to the rent-to-own shop that she was getting her TV from. Talk about the blind leading the blind…and like the naïve teenager I was, I went straight there after work. I was elated to learn that I could afford a living room suit, bedroom suit, and a computer without hurting my wallet.

Since my coworker had already explained the process, I really did not listen to the salesperson explain it. I was imagining how awesome everything would look in my apartment. I made my payments faithfully and thoroughly enjoyed my new furniture, until about a year later. When I had gotten the furniture, after the excitement calmed down, I had calculated that if I made every payment on time, I would have everything paid off by a certain date.

The plot twist

As that date was approaching, I started really looking at my payment receipts and saw that I still owed thousands. It was actually almost the amount I started out owing. And that was the day I learned all about how rent-to-own places make their money. The original amount they quote is already two to three times the price you can purchase it for. Then, they add that ridiculous interest. By the time you realize what is going on- like me- you have invested so much in the product that you do not want to send it back. It is a trap. I could not even be upset with my coworker either since she had no clue to start with either.

If you are in great need, however, you might consider renting from one for a couple of weeks. For instance, if I had no other way to cook after my oven quit and no money to buy a new one yet I had a good check coming in two or three weeks, I could have rented an oven until that check came. That is the one really good thing about rent-to-own. You are not locked in a contract so you can send something back when you need to.

Conclusion

Major appliances do play a major role in our lives. If you are extremely accustomed to having an appliance and it suddenly stops working, it can feel a lot like missing a part of yourself. You suddenly have to figure out how to live without it. That can be difficult when you have no alternatives available at the time. Even at your most desperate times, try not to make any rash decisions.

Getting a personal loan for major appliances now just to lose it for non-payment in a couple of weeks is not going to help you one bit. Same goes for any loan. Even if you want to get something else, like a loan for a computer, think carefully about the reasons for getting a personal loan.

Instead of acting out of emotion, think through your situation logically and analytically. If you must, ask yourself what advice you might give a friend if they were going through the same situation that you are. Quite often, people on the outside can see things that those on the inside cannot. So, looking at it from a different perspective might help you come to a better solution. However, if you absolutely must or choose to get a personal loan for major appliances, be wise about it by carefully considering the terms of the loan.

Do Personal Loans affect your Tax Return?

Many people use personal loans to suit a wide variety of different needs. Some people use them to pay off debt, fund a vacation, or even pay for car repairs. There are many uses of personal loans, which you can easily see if you ever try to get one. This is why the right question to ask is whether personal loans affect your tax return.

Personal loans are designed for general use and don’t have to be used for specific things, unlike a house loan or car loan. Although personal loan functions as added funds, in addition to your income, it’s not considered income. However, there are circumstances when a personal loan is considered income. In these situations, personal loans affect your tax return.

If you’re interested in getting a personal loan online, you came to the right place. Fiona and Loanry bring you carefully selected reputable lenders. You can enter your information and see if you qualify for a loan with any of them:


What is a Personal Loan?

Personal loans are for general use and can be used for anything. Generally speaking, personal loans aren’t considered income. They must be repaid and aren’t considered income because of this. These loans can be obtained through banks, peer to peer lending systems or an employer, as well as from many other sources. These loans differ from other loans, like car and house loans, because they are unsecured and don’t usually require collateral. A house or car loan that goes unpaid can result in the loss of a house or repossession of a car. This is an important thing to consider when thinking about whether personal loans affect your tax return.

Exceptions in Cancellation of Debt

Generally speaking, cancelled debt or personal loan is considered taxable income. Here are some cases when this is not the case:

  • If a loan is forgiven as a gift from a private lender, it’s not considered income. The exceptions don’t end there.
  • If a lender forgives a loan of thirteen thousand dollars or less as a gift, it’s protected under the million-dollar lifetime exemption gift tax. It’s not taxable as income.
  • If a lender dies and cancels a debt in the will it’s not counted as income either.
  • Other circumstances that may exclude a loan from taxation include a Chapter 7 or Chapter 13 bankruptcy. In addition, if your loan was discharged as a result of a Chapter 11 bankruptcy, you won’t owe taxes.

How Do Personal Loans Affect Taxes?

As discussed earlier, personal loans affect your taxes when they’re forgiven. A personal loan becomes taxable in this instance. Plus, you may have to report your interest payments on a loan if they are tax-deductible. Personal loans affect your tax return if your lender sends you a tax form called a 1099 C. You’ll have to report the loan’s principal or interest to the IRS as taxable income. Personal loans that are used for investments, business expenses, and qualified education expenses are tax-deductible.

The ABC’s of Personal Income Tax

Taxes are taken out of our paychecks before we ever see the dollars we work so hard for. When you buy items at the store, sales tax is charged in addition to the cost of the item. Savings accounts are interest-bearing and the interest is taxable. In addition, if you own a home you will more than likely pay property tax. Even when you buy a car, you pay special taxes upfront as well as in your car note.

You can’t escape taxes. They are everywhere. But it’s important to be educated enough to understand personal income taxes. The tax dud date is the 15th of April everywhere. Once you file your taxes, you will get a refund if you’ve paid more income tax than you owe. If you owe more than you’ve paid, you’ll have to pay the difference. If you don’t receive a refund and owe nothing, you’ve had enough withholdings and deductions to pay all of your tax liabilities. Understanding how your income tax works is part of tax management.

Main Points to Remember about How Personal Loans Affect Your Tax Return

Conversely, there are scenarios when Personal Loans affect your Tax Return. If your loan is forgiven by the lender, the money you received will be considered income because you don’t have to pay it back. Other situations include scenarios when the lenders forgive the loan and consider it a gift. Once the loan is forgiven, it is considered a COD or cancellation of debt and you no longer have to pay it back.

These are examples of how a personal loan can be considered taxable income. In certain situations, personal loans affect your tax return. A loan can be looked at as income if it has has been forgiven. In addition, if the interest on your loan is taxable, you will have to report that as well. The circumstances under which Personal Loans affect your Tax Return is very specific. If your loan is forgiven and you are required to report the interest on your loan, are both situations where your Personal Loans affect your Tax Return. However, it should be noted that a loan of $13,000 or less, that a lender decides to gift to you, is not considered income and is not taxable. However, there are some situations when Personal Loans affect your Tax Return.

If you Owe Income Tax From a Personal Loan

If you’re lucky enough to get your loan forgiven, you’ll need to prepare yourself to pay the income tax on your loan. It is now considered a cancellation of debt which means that its no longer a loan. It’s income because you don’t have to pay it back. It may be scary to find yourself responsible for paying the income tax on a forgiven loan. However, you’ll need to act quick. If you don’t have funds available to pay your income tax debt you may need to set up a payment plan.

Beware, however, because the payment plans often include higher interest and penalties. You may be better off taking out another loan if you’re left with a costly payment plan. Just keep in mind that you do have options. Don’t panic.Us all the tools available to find the best method to eliminate this tax debt. You may find yourself taking out another loan to cover your tax debt.

What is a W-2 and a W-4

When you’re hired as an employee you’re required to fill out a form called a W-4. This form allows you to choose how much federal income tax is withheld from your paycheck. There are many tax tips you can employ when it comes to filling out your W-4. Your W-4 will tell your employee how much to withhold from each of your paychecks. A W-2 is the form that employers send you at the beginning of each year which indicates how much you made during the prior year as well as how much was withheld. You will need to use the information on your W-2 to fill out your tax return.

Should You Take Out a Personal Loan to Pay Off Income Tax?

If you file your income tax and owe money you will need to pay the money owed by April 15th. If you don’t have the money, the IRS does offer payment options. However, these options include penalties and interest. As a result, many people consider taking out a personal loan to pay off the debt.

A personal loan has advantages over many other payment options. Personal loans can have lower interest rates than credit cards. Both options usually have higher interest rates and penalties than the IRS plan depending on your credit and other factors. More often than not, a personal loan allows you to pay the IRS what you owe, but you need to make sure you’re not paying more than what’s offered by an IRS payment plan. A consumer loan is often a wise choice when it comes to paying off debts if you can save on interest or you need lower payments with a longer-term loan.

Personal Loan to Pay Taxes: Wise Move?

Why Isn’t a Personal Loan Considered Income?

Although a personal loan increases the amount of money you have, it’s not considered income. The primary reason why a personal loan isn’t considered income is that it’s money you have to pay it back. This is also the reason why a personal loan isn’t considered taxable income.

When Is a Personal Loan Considered Income?

To give the full answer to whether personal loans affect tax return, we have to discuss the cases when personal loans are considered taxable income. Although this is usually not the case, there are some exceptions to the rule. This is when personal loans affect your tax return. If a personal loan is forgiven, it becomes taxable income because you don’t have to repay it. If the lender forgives the only they forgo getting that money back. As a result, the loan becomes income. When a lender forgives a loan it is considered a cancellation of debt. However, a lender can cancel part of a debt and leave the remaining portion which would make part of the loan income and taxable. Cancellation of debt income, or COD, is considered taxable.

Online Lenders vs. Banks

Once you’ve made the choice to take out a loan, you need to know what resources are out there. Typically, there are differences between online lenders and banks. Banks tend to offer lower interest rates whereas online lenders toed to have higher interest rates. In addition, inline lenders usually have flexible terms and may offer loans to be people with poor credit. However, banks often have a lengthy process that makes it difficult to get approved unless you have good credit. If you want to make the best choice possible when it comes to getting alone, you may want to get a third party to help you choose the loan that’s going to be best for your personal situation and financial need. There are four key differences between banks and online lenders that you should consider:

  • The interest rates
  • The eligibility time
  • The qualifying process
  • The costs and the fees

 Eligibility Requirements for a Personal Loan

All banks and lenders will have a different qualifying process. However, most will look at your debt to income ratio. In addition, some lenders may look at other areas like job stability,on-time payments, age, and proof of income. These factors will more than likely be considered along with your credit score. However, there will be variation in what each back or online lender looks at. You may even be required to present documents along with your application.

Quick Personal Loans

Many people may seek personal loans from online lenders because there is usually more flexibility and it is easier for someone with poor credit to receive a loan. However, these quick and easy loans come at a cost. The interest rate is usually much higher for quick loans. In addition, there is usually a sea of different lenders to choose from when it comes to these types of loans. Convenience is key and you usually pay for this with a higher interest rate. Many people turn to Credit Shop to find loans and credit cards that are going to be consumer-friendly. However, regardless of the urgency, take your time and use any online tools you can find to find the best lender for your particular situation. Pay close attention to three important areas when looking for a quick personal loan:

  • The amount of the loan
  • The terms of the loan
  • The interest rate

Above all things, don’t settle for a loan with terms and interest that you aren’t comfortable with. Do your homework and shop around. You may find a local finance company that will meet your needs better. In addition, when you are shopping online make sure that any lender site you visit has “https” in the web address. The ensures that the website is secure. If the web address doesn’t include https, the information you submit on the site may not be private.

Consider Your Credit

Quick personal loans will require a lender to look at your credit. Your interest rate is usually determined by your credit score. Logically speaking, the lower your credit score the higher the interest rate. In addition, if your credit score is less than 650, you will probably have a difficult time finding lenders. Plus, you may only be eligible for a loan of five thousand dollars or less. In addition, if you cant get a quick personal loan you may want to seek other options like a credit card cash advance or a secured personal loan.

How Can I Improve My Chances of Getting a Personal Loan?

There are many things you can do to improve the odds of getting a personal loan. Make your credit card payments on time and don’t max out your card. This will improve your credit score. You at least need a 660 credit score to get a personal loan. In addition, don’t open any new lines of credit before applying for a loan.

You should also decrease your debt by paying off as much of it as you can. This can be done in many different ways. You can make weekly payments or make a balance transfer if it’s advantageous to you.

You should also cut down on credit card spending and only borrow the amount of money you need.

Last but not least, it’s good to use a free online lender service. This service will help you find a lender best suited for your credit score and financial background. This service will allow you to pre-qualify for lenders to eliminate the lenders that aren’t suited for your situation. Pre-qualifying is a soft credit inquiry, therefore it won’t hurt your credit. If your credit score is too low to get a personal loan, you may want to consider getting a co-signer. A co-signer with good credit can amplify your chances of getting approved for a loan.

Know the Facts

Proceed with caution when looking for a loan. There are many different lenders and banks to choose from. However, your credit score will determine which lenders are willing to work with you. If you do your homework and follow the suggested actions, your chances of getting a loan will be greatly improved. Fortunately, there are a lot of tools and guidance to help direct your path to the best loan opportunity for you. Take the steps needed to clean up your credit and do your research.

Your Bills and Your Credit

Reducing your debt can have a positive impact on your credit score. Beyond paying your bills on time, you may want to consider negotiating your bills. Memberships that aren’t being used should be cancelled. You can always reopen these memberships when the time is right. You may be able to renegotiate an interest rate or the terms of a bill or credit card. In addition, if you are paying for or other services, you may be able to bundle some of these services to change money. It’s also a good idea to take advantage of special promotions. You may be able to save a ton of money that way.

More on Personal Loans and Taxes

It takes good credit to get a personal loan with good terms and a low-interest rate. If you don’t have good credit you may find it difficult to get a personal loan with low interest or to get a personal loan at all. You may want to consider other loan options if you find yourself in this situation. If you have a credit card, you may want to consider getting a cash advance form your credit card. However, once you secure a personal loan its important to realize that your loan isn’t income even though you’ve received the money. Keep in mind that a personal loan is considered income only if it was forgiven by the lender. Short of that, there are few other scenarios where a personal loan might be considered income.

Conclusion

It’s obvious that education is a big part of the solution when it comes to understanding personal loans and income tax and how the two work together. It’s also a good idea to know what it takes to qualify for a personal loan and what to do if you don’t qualify. There are usually alternative options that you can try if you can’t get a conventional loan. However, regardless of what you do take your time and read the fine print. Pay attention to the interest rate, terms, and the amount of the loan. Don’t take the first offer you get. If you’re uncomfortable with any part of the loan, don’t take it. Use the online tools and a finder to help you decide on the best loan for your particular situation. You won’t be sorry that you took your time and found what was best for you.

Remember, an ounce of prevention is always worth a ton of cure, even in situations that are rare and unlikely. Personal loans are rarely considered income. However, do your homework to ensure that you’re not missing any important details, and to be aware whether personal loans affect your tax return in your specific situation.

How Does Peer-to-peer Lending Work?

When you think of crowdfunding, you probably think of an entrepreneur gaining funding for a business or an individual gathering funds for a medical bill. You, too, can crowdfund though. That’s what peer-to-peer lending means.

Peer-to-Peer Lending 101

You either loan money along with a number of other individuals, then earn from the interest the borrower pays, or you’re on the receiving end of the money, getting one large cash loan from a number of micro investors. A P2P firm organizes the loans. The first of these organizations sprang up in 2005 and they’ve taken the lending world by storm, offering cash loans to those with mid-range to good credit.

How peer to peer lending works

Peer-to-peer Lending as a Borrower

Peer-to-peer lending makes obtaining credit more affordable for the borrower. While credit card interest rates continue to climb, the rates for peer-to-peer lending tend to remain lowish – around six or seven percent. That makes it a very affordable loan.

These peer-to-peer loans do not always carry the same level of credit check as a credit card or bank loan. They offer a ready alternative for those with mid-range credit scores that fall just under the prime borrower threshold. That makes them ideal for people who make their payments, but may have had one hiccup that lowered their overall score or those who have no credit whatsoever because they’re just starting out.

The prime borrowers have a credit score of 620 to 900. Those who could be considered to “just miss it” are those with a score in the high 500s to scraping 620. These individuals generally deserve the benefit of the doubt and a lower interest rate than a poor credit risk who has a score in the 300s or 400s.

Peer-to-peer lending lets them obtain money at a prime interest rate and gain an easier approval than other methods. They still only have a single loan payment each month – to the organization that handles the loan. That organization then handles the distribution of loan repayments to individuals who contributed to the crowdfund.

Peer-to-peer Lending as a Lender

As a lender, peer-to-peer lending provides a mutually beneficial method of investing with a strong rate of return on investment (ROI). With most savings accounts earning less than five percent interest and certificates of deposit (CDs) similarly comparable, investors looking for a lower risk investment with a higher rate of return can turn to peer-to-peer loans as an investment.Handshake icon

It remains a low-risk investment because, in most countries, the loans are covered in the same manner as others or in a similar manner. For example, in the United Kingdom, the Financial Conduct Authority (FCA) regulates P2P lenders, but the loans don’t receive protection under the Government’s Financial Services Compensation Scheme (FSCS). In the United States, the loans may be covered by the FDIC, depending on the lender.

In Europe, common platforms include RateSetter and Zopa. These organizations put together a platform that connects the lenders and the borrowers. They function as an organizer, not a lender. The lenders are the investors who are crowdfunding the loan.

The P2P firm keeps a small percentage of the money. It’s less than the loan fees that banks and other traditional financial institutions charge.

The investors make money on the loan by getting the interest paid on the loan. They make money the same way a bank would.

Peer-to-peer Lending as a P2P Firm

Companies putting together these loans, like Zopa and RateSetter, don’t do it altruistically. They aren’t charging fees like a loan shark either though. They charge a very small percentage for organizing the loan and “introducing” the lenders and the borrower.

Since their inception in 2005, these peer-to-peer lending firms have reached the billions mark in loans. Zopa topped more than £1 billion in loans. RateSetter has managed more than £800,000 million in loans.

While most of the firms offer person P2P loans, others specialize in business loans. Funding Circle brokers loans to businesses.

Lending for Everyone

Unlike angel investing, loaning money through a peer-to-peer lending institution doesn’t require you to be a billionaire or millionaire. Many of the micro lenders are just average people who have savings that they’d like to grow more quickly than a savings account allows them to do so.

There’s no minimum or maximum allowed. A lender may choose to loan $5 or $1,000. They determine how much money they want to loan and over what period of time.

The interest rates charged vary, but typically range between 7 and 8 percent. There is no typical loan amount, but there are “standard” options like taking out a loan for $3,000 for 36 months.

The terms are typically shorter than with other loan types. These are not designed to function as a mortgage or other long term loan type. They can provide a small amount though for emergency needs or for mid-sized purchases like a used or new car.

Risk Management

Whether you are the borrower or the lender, there are still risks. These are greater on the lender side. There’s truly no risk free investment.

As mentioned, these loans aren’t usually covered by organizations like the FSCS and FDIC. In the case of the FSCS, you’d be protected if you deposited funds of up to £75,000 with a financial institution. If the institution folded, you’d still get your money. The US’ FDIC works the same way, providing insurance to cover financial institutions that protects the funds each individual deposits.

Most peer-to-peer lending does not include this protection.

P2P firms generally create their own safety net system. For RateSetter, that’s a provisional fund that protects the lenders culled from fees charged to borrowers. It covers defaults and late payments. Zopa provides a contingency pot and spreads funds among a multitude of customers to minimize risk. The business lenders, like Funding Circle and Lending Works, also provide safeguards that protect micro lenders.

A combination of vetting borrowers through credit checks and selective lending has served to keep default rates low.

Peer-to-peer Lending Is Here to Stay

P2P have really taken off in the UK where the government continues to make it easier for both sides to get involved. In the UK, micro lenders can enjoy earning their interest payments tax-free because the country began allowing P2P loans within individual savings accounts (ISAs).

There’s also another wave of crowdfunding P2P sites developing. The newer sites specialize in risky start-ups. They are crowdfunding to “create” an angel investor sized investment. These new sites do not create the safety net fund that established P2P firms like Zopa and RateSetter do.

The new startup loan sites carry a much higher risk than other P2P firms.

These sites do not yet have brokerage track record nor do they have a history of accounts. They’re a new version to a now established lending method. Those specializing in startups model the P2P loan much closer to that of an actual angel investor. You are taking on the same level of investment risk as you would if you loaned the startup money directly. You are simply able to do it with a smaller investment than an angel investor.

Unlike direct investment as an angel investor, you may not get much information on the startup through a peer-to-peer lending firm. As Saga points out, this makes predicting the viability of the business challenging. Most of the newer companies that specialize in these loans do not require a business plan for the borrowers. You won’t get to read this in advance of making the loan therefore. Chances are you won’t even know if the startup already has its minimum viable product (MVP) developed or still in the works.

You’ve Got to Keep It Regulated

While the lending type and its organizations have not existed long in comparison to other types of financial lending institutions, all P2P firms have the opportunity to join the Peer-to-Peer Finance Association (P2PFA). This trade organization admits only members who have passed vetting tests and adhere to a specific, stringent rule set. The P2P firms specifically named in this article – Funding Circle, Lending Works, RateSetter and Zopa – all belong to P2PFA. Check the Association to ensure that the P2P firm you’re considering using as a borrower or lender belongs to the P2PFA.

Each country has its own industry/trade association. Look at the P2P firm’s location. If it is a US firm, it will use a different association. That’s why you likely won’t see Lending Club, Prosper or Sofi listed in the P2PFA. Some companies that do business internationally, on the other hand, may meet the criteria for more than one organization, so you may find some firms listed among those in more than one trade association.

Why Apply for a Peer-to-peer Lending Opportunity?

As mentioned, these loans really aren’t for the mega huge needs like mortgages. You can obtain smaller loans for auto loans, debt consolidation, home improvements, medical bills and travel. Some sites, like Sofi, let you refinance your student loans using peer-to-peer loans.

Essentially, any need small enough to tantalize you to take out a credit card is fodder for a P2P loan. You’ll get a much better interest rate, typically.

Your Credit Score Still Matters

Rather than the bank checking your credit score, the peer to peer lending platform performs the due diligence check. Only if your credit score passes their muster will they then offer your loan need to their investors.

That means you still need to ensure that your credit score is as healthy as possible and your credit history accurate. Visit Creditry to get started. You can make sure your credit score can obtain you a favorable loan rate before applying.

The P2P firm examines your credit score just like a bank would. They look at how many, if any, payments you made late or skipped. They look for any loan defaults.

if your credit report reveals you have healthy credit, the P2P firm will score your loan for risk and offer it to their lenders/investors. The loan score helps the lenders understand how risky the loan is. That score lets them understand in a single number how much interest they’ll likely get returned versus the risk of the loan going unpaid.

Each site varies in the minimum amount of a loan a lender can purchase. At some sites, it is $10. Others start at $25. The top out is the entire loan.

Typically, the loan gathers investors for up to 14 days on the site. During that time, investors bid on or buy portions or all of the loan. One investor can purchase the entire loan although that is rare for a single investor to take on a loan. That means this is not an option for fast loans.

Strengthening Your Credit Score

You need to strengthen your credit score as much as possible before applying for a loan through any type of lender. You probably think of bad credit as someone with a score of 300, the lowest you can get. That is not how a financial institution thinks. Credit scores go up to 900, but anything beneath a score of 640 tells a financial lender of any type that you make a poor lending risk.

credit score factors

You might consider your score of 540 pretty good, but banks see it differently. Financial institutions know you don’t have to be rich to have a strong credit score. You just need to manage money really well. Many people of normal means have high credit scores. So, when a peer-to-peer lending institution sees a lower credit score, they see a person who doesn’t manage money well. Change their perception by learning to manage money better.

The advice that works to raise your credit score probably won’t surprise you. Between TV commercials and your parents, you’ve probably heard it all before. Listen. You can raise your credit score by doing such simple things as checking your credit report and paying your bills on time. Here are the specifics of what you need to do to raise your credit score and achieve a better perception of yourself by financial institutions.

1. Run Your Credit Report

Look at your report both as yourself and as a lender would. It’s free to do obtain your full report once per year. Obtain a report from each of the three major credit reporting agencies.

Check the credit reports for errors and inconsistencies. Not every agency will have the same data because some of them collect more data. For example, Experian lets individuals opt into a collection of data from their utility and cell phone payments. The credit reporting agency then includes this in the calculation of the score. You can only do this by visiting the Experian site, opting in and providing your utility information. Only this credit reporting agency will obtain this information.

Immediately report any spotted errors or inconsistencies to the credit reporting agency. You’ll need to document your proof of the correct information. Include proof of payment, credit card or bank statements showing the payment dates and accounts. It will take a few weeks for the agency to correct the data, but once they do, your score gets recalculated.

2. Avoid Late Payments

As basic as it sounds, the underlying key to having stellar credit is to pay your bills on time. Even if in the past you made late payments, you can increase your credit score after only six months of making all your payments on time. It increases your score that quickly.


You can consolidate your loans, using a non-profit agency such as CareOne. They will contact each creditor for you and negotiate a restructured debt. After negotiating with each creditor, they’ll combine them all and you’ll make a single payment to the non-profit each month. The organization then distributes the newly negotiated payment to each creditor. This lets you quickly reduce your overall debt, plus unless you miss a payment to the non-profit, your payments are never late. That factor, plus the reduced debt, quickly raises your credit score.

3. Increase Your Income with a Side Hustle

Maybe hustle harder doesn’t sound fun. It can save you money though. While loans cost you more money than you need, a side hustle does nothing but bring you income. You can pay down your debt with the income. So, add another stream of income.

How to Calculate Your Debt-To-Income Ratio Accurately?

You can also ask for a raise if you have been with your current employer for a while. If they do not have a regularly schedule performance raise dovetailed with their annual performance reviews, ask for a raise as long as you have performed well at your job.

Get a second job or start freelancing. It is pretty easy to land a job in retail or fast food or waiting tables. They might not be glamorous gigs, but they pay decently nowadays. Most employers start you at $10 to $12 per hour. Work at the job for about six months before applying for a loan. Heck, having the job can prevent you from needing the loan.

Either bank the money you earn from your second job or use it to pay off existing credit cards and loans. This reduces your debt-to-loan ratio and that raises your credit score. If you choose the savings account option, you should take the account statements to the loan officer to show that if you did lose your job for a few months, you’d have means to still pay the loan payments.

Freelancing lets you set your own hours and earn money. It does not require professional training for many positions such as appointment setter, personal assistant, typist, transcriber, Lyft or Uber driver, etc. This won’t give you traditional pay stubs, but you can sock away your pay in a savings account to list on a loan application.

4. Plan It Out With a Budget and Loan Calculator

There’s nothing simple about getting a loan or improving your credit. You have to improve your credit to get a loan. One way to do this is to make a budget and stick to it.

Look at your current budget. If you do not have one, create a budget. You should have at least 30 percent of your income available before taking out a loan. That is because your total loan repayments including the loan you are hitting up the peer-to-peer lending institution for should not exceed 30 percent of your monthly income.

Use a loan calculator to calculate what you can comfortably afford. Do not try to take out a loan for the absolute maximum for which you qualify. This is just a bad idea that can land you in a lot of trouble if anything happens that makes you late for a payment or two. Use the calculator to figure out your potential monthly payments using various options for loan term and interest rate, plus down payment, if that applies.

What If You Do Not Qualify for a Peer-to-peer Lending Institution?

It is not the end of the world if you do not qualify for a loan from a peer-to-peer lending institution. While those who just miss qualifying as prime borrowers probably can qualify, many do not. You can still obtain a loan elsewhere. Once you feel ready to apply for a loan, visit Loanry.com to start loan shopping.

Loan Shopping with Loanry

Loanry does not offer peer-to-peer lending. In fact, it offers no lending whatsoever.

Wait. What?

That’s right. Loanry is a loan mall. You visit it like you would the shopping mall only instead of hitting up Gap or Dillard’s for jeans, you shop for a loan among many lenders.

Loanry provides individuals and businesses with a simple process for finding a lender. Its’ participating institutions offer a plethora of loan types, including those loans geared for those with bad credit or no credit. Fill out a form below to use this loan mall that makes finding a lender is a breeze.

Alternatively, you can compare lenders using their money tools.

As mentioned above, Loanry does not make loans.  It allows them space to interact with consumers similar to the stores in a shopping mall. Your loan may come from a financial lender if they decide to lend you money and you accept their terms.

Loanry’s site offers may types of loans, for example, auto loans or home renovation loans.

It also may save you time going to too many banks or financial lenders whose qualifications you did not meet. The Loanry tool cuts your research time, so can determine the appropriate lenders to approach more quickly. Start here:


Other Benefits of Using Loanry

Using it also reduces the number of requests on your credit report. These report requests happen every time you apply for credit, no matter what type. Each request lowers your credit score just a little. If you apply for many credit cards and loans, you may reduce your score, even if you did not take any out or were refused for each one.

While Loanry is not a lending institution, it does offer educational articles to help its users make better decisions about money. It offers these financial educational articles for free.

Once you are ready to apply for loans, you may find that your bad credit limits your lender options. Before you go to a loan shark, explore your other options. While you will still end up paying higher interest than someone who could afford a prime interest rate loan, you do not have to resort to that high of an interest rate. You do have alternate options though since the Internet has spawned the peer-to-peer craze.

If you qualify for a peer-to-peer loan, you’ll pay much lower fees than you would with a bank. For example, Lending Club and Prosper may charge 1 percent annually on the principal amount an investor loaned.

Peer-to-peer Lending as an Investment

No one is being altruistic when they loan money through a P2P firm. Many millennials are using P2P lending as a starter investment. They view the stock market as more chancy. They also cite the good feeling of helping others as a reason for offering P2P loans.

Perhaps you never considered making an unsecured consumer loan as an investment opportunity, but it is the new thing. The borrower does not have to offer any collateral, so there are no guarantees you will get your money back, but many of the P2P firms have built-in protections, as mentioned.

Statistic: Value of global peer to peer lending from 2012 to 2025 (in billion U.S. dollars) | Statista
If the borrower does default and you used a P2P firm that does not provide a contingency fund for repayment in such cases, you have a couple of options to recoup the money.

  • You can use a collection agency to obtain repayment.
  • You can sell the loan on a secondary market.

Both options require a time investment and neither guarantees you will recoup the funds. While you may recover the funds you loaned, it takes longer than if the borrower had simply repaid on time.

In Conclusion

Peer-to-peer lending provides an emerging alternative for both borrowers and lenders, the latter as an investment opportunity. While those with bad credit will still need to apply for sub-prime loans, those with fair or good credit can turn to peer-to-peer lending as an alternative. This option nets them a much lower interest rate and can provide better loan terms in some cases.

Those with poor credit can still use options like Loanry.com and Cashry.com to locate traditional lending institutions that extend loans to those with sub-prime credit. A loan shopping site makes it simpler for people to find loans. If you do not qualify for a P2P loan, you may still be able to obtain the money you need by taking out a loan, albeit at a higher interest rate, from a traditional lender.

Be bold. Try out peer-to-peer lending whether you need to take out a loan or you would like to experiment with making loans. You can obtain the money you need or make money by using P2P lending as an investment.

How to Avoid Defaulting on a Personal Loan?

Thinking about a personal loan? Before you do, make sure you read this entire article know all the facts. There could be a ton of reasons why you might need a personal loan. It could be for something new and exciting like a car or vacation. It could also be for some unplanned emergency expense that you do not have the money to pay.

Not all reasons for needed a loan are happy ones, but no matter the need, the same considerations need to be made by you. You should enter into a loan agreement thinking that you will do anything to avoid defaulting on a personal loan. No one wants to be in default. That is a scary position in which to find yourself. Keep reading to find out how to avoid falling into default on a personal loan.

What Is A Personal Loan?

In order to help you to avoid defaulting on a personal loan, it is important to understand what is a personal loan. In the simplest definition, a personal loan is money that a lender allows you to borrow. The lender charges you interest to allow you to borrow the money. The interest rate a lender offers you is directly related to your credit score.

You promise to the lender that you will make regular monthly payments per the terms of your agreement. Typically, a personal loan is paid back in three to five years. I mentioned some key words that you want to remember. They are important and I talk about them again later in this posting. Those words are interest rate, credit score, and regular monthly payments.

You can do just about anything with your personal loan once approved. A lender typically asks your intention for the money. Typically, the lender does not base your approval on your reason for needing the money. People have used personal loans to pay for weddings, houses, home repair cost, or a new wardrobe. You can use a loan for anything you can imagine.

Keep in mind that just because you can, does not mean that you should. A lender may agree to approve you for a loan, but that does not mean you can afford the loan. Your budget should play a key role in making the decision to get a consumer loan, which is another name for personal loan.

Are There Different Types of Loans?

There are many different types of loans available to you. There are also many different loan places in which you can obtain a loan. Make sure you read and understand all of the fine print when agreeing to the terms of your loan. A lender must disclose all of the fees and charges in their agreement with you. It is up to you to read the agreement. There are traditional loans that you find at a bank. These types of loans may have slightly lower interest rates, but you must go into the bank to apply. A loan office must fill out the paperwork with you.

These loans tend to take a little longer process. Not as long as they used to as the process has become much more streamlined. For those who have no interest in going into a bank, online loans are available. As the name states, these loans are available completely online. You fill out the application and upload any documents all on the same website. You do not have to interact with a person. These loans typically have higher interest rates. Not that long ago, they were only for those with bad credit. That really is not the case anymore.

Another type of loan is a payday loan. This loan is different because is it intended to be short term. You borrow small amounts of money with the expectation you pay it back in a short amount of time, like two weeks. Your credit is not a factor for payday loans. The only thing they care about is your income. No matter what way you obtain it, you want to avoid defaulting on a personal loan.

Online Lenders

When it comes to online personal loan lenders, you must be cautious. Some online lenders are looking to scam borrowers. They are looking for people in vulnerable places to get more money out of them. You can avoid falling into this trap by arming yourself with knowledge. Research any potential lender and find out all you can about them. Your lender should have credentials to lend money in your state. Make sure that any lender you use has the appropriate credentials.

You can also use Loanry! We connect you to reputable lenders quickly and efficiently. By filling out this form below, you allow us to research the database and find unique offers suitable for your situation. Sounds good? You can see if you can get a loan, right now:


What Does It Mean To Default On A Loan?

Defaulting on a personal loan essentially means that you are not paying on that loan. However, lenders seem to have different ideas of what defaulting truly is. In some cases, you miss one payment, and the lender says you are in default. Other lenders wait until you miss a series of payments, two or three, before they claim you have defaulted on your loan.

What Does it Mean to Default on a Personal Loan?

It is important to understand how your particular lender views default so that you can avoid defaulting on a personal loan. Once a lender considers you to be in default, they hold nothing back in getting their money. Trust me, a lender always gets their money. Once you have fallen into default, the lender has a few ways to handle it. Typically, the first thing that happens is the collections letters and calls. At first, it is directly from the lender.

Eventually, the lender may decide to sue you or turn you over to a collection company. When your lender turns you over to a collection company, the lender has basically sold your debt to the collection company. They got much less money than what you owe them, but they got some money and they write off the rest. The collection company, however, is relentless. Believe me when I say they do not care about you. Their only focus is getting their money back. Remember, they just paid the lender for your loan, so they basically paid to harass the money out of you. It is not fun being on the other end of that.

If you can, I suggest you settle with this company. Depending on the company, they may be willing to work with you on a settlement amount. If this does not happen, you may end up in court anyway.

Can I Be Sued If I Default On A Loan?

As I mentioned above, yes you can be sued. You should avoid defaulting on a personal loan at all costs. Depending on the amount of your loan, if it is small enough, the lender may write it off. If it is a large amount, like a mortgage, someone is going to sue you. It may either be the actual lender or the collection company that sues you. In addition to being sued, the property, in the case of a mortgage, is seized, so you lose your house.

If you choose not to go to court, the court will issue a judgement. That judgement could include garnishing your wages, taking money out of your bank account, and sending a sheriff to your home to seize your personal property to pay the money that you owe. A sheriff knocking at your door is not that likely, unless you owe a lot of money and you have a sizable amount of assets in your home. The court may require you to disclose that assets that you have. Bottom line, show up in court.

If you show up in court, you have the opportunity to work with the collectors and come to some agreement on payment. Together you may be able to come up with a payment plan. Often times, when in court a collector is more agreeable to payment plans. When dealing with you directly, they may not be as willing to negotiate. In court, however, it is different. If the court see that you are attempting to make payments and the collector is not allowing you to do so, that reflects badly on the collector.

Can I Go To Jail For Defaulting On My Loan?

If you are the average run of the mill person who defaulted on a personal loan, you are not going to jail. You should still avoid defaulting on a personal loan, no matter what. However, you do not have to fear going to jail. Although you may be put throw the ringer by the lender or a debt collector. Someone in your position is not going to end up in the slammer. Now, if you have committed some type of crime and there was some type of debt as a result. A real life example of that is a financial advisor taking some money off the top of all his clients investments. He now owes money to all of those people, but he has also committed a crime because he stole all their money.

The real reason he is going to jail is because he was stealing money. There probably was a time hundreds of years ago where people would go to jail for not paying their debts. Those same people would also have their hands cut off for stealing. We have come a long way since then!

I Do Not Think I Can Pay My Loan; Now What?

Here is the thing, if you know you are getting into a place where you cannot pay your bills, reach out to the lenders. Believe it or not, many lenders are willing to work with you to get you in a place where you can pay them. They want you to avoid defaulting on a personal loan, too. Their bottom line is at stake here. If you are honest and contact them, they may work with you. They might be willing to let you skip paying them for a month. They may be willing to take half of the payment you owe them for a few months.

By entering into this agreement, you are promising to pay the amount you agree upon. You are also promising to begin paying the regular payment amount on a specific date. Keep in mind, they are not writing off the amount you are not paying them. They are adding it on to the back end of your loan.

Lenders know that working with you is a better option. They know if they accept a little less money now, you may be able to get back on track and pay them what you owe them. They understand that things happen and sometimes you might find yourself in a jam. Truthfully, the best way to handle this is to be upfront. I know it may seem embarrassing. I know it may seem like you are begging them. You may have to get over that feeling to do what it is your best interest.

Is There Any Way To Protect Myself From Defaulting On A Loan?

As I stated above, if you know that you are getting into a position where you are not going to be able to pay your loan, you should ask your lender for help. However, there are ways to avoid defaulting on a personal loan all together. I understand that things happen and we all find ourselves in an emergency situation. Once you find yourself in the situation, it may be hard to get out of it, especially if you have a lot of bills.

Smart Money Tip!

The best way to avoid this is to not get into this situation. Before you apply for a loan, determine if you really need the loan. Are there other ways to get extra money? Is it possible for you to get a part time job to cover those expenses. Can you borrow money from family or friends, so that you do not have to go to a lender.

There may be other options. You should consider all of your options and applying for a loan should be one of the last options.

Understand Your Budget

Earlier I mentioned that there are many things you should consider before applying for a personal loan. One of the things you need to take into consideration is your budget. You should not take out a personal loan that you cannot afford to repay, thus avoid defaulting on a personal loan. It is important to understand your budget before jumping into a loan.

You should consider using a budget application to get a handle on your finances. With the help of an application, you can list out all of your budget expenses, line by line. This allows you to take a look at all the ways you are spending money. It also helps you see all the ways you are wasting money.

It gives you an indication of where you may be able to reduce your expenses. Do you have a gym membership or magazine memberships that you are not using? Now is the time to cancel them. Do you have a habit that you can cut out of your budget? Maybe you buy coffee every day. You can make coffee at home and save yourself a lot of money. This may also be the time to cut out a bad and expensive habit, such asCLICK IMAGE: Learn about Budgeting for A Personal Loansmoking. You can save a significant amount of money by breaking that habit.

Take a look at your income

Once you see all of your expenses and cut the expenses where you can, you have a good idea of the money you are spending. Once you have done that, you can take a look at your income. Then you can see the difference between how much you bring in and how much you spend. That also lets you know how much is left over after all your existing bills are paid. Once you know that amount, you should not apply for a loan that is more than the amount you have left. If you do, you are putting yourself in a terrible position, one where you are taking on a loan that you cannot afford.

Why Does Interest Matter?

Interest plays a large role in the amount of your personal loan. It can increase the amount of your personal loan to a place you cannot afford. Learn as much as you can about interest rates to avoid defaulting on a personal loan. You should think of interest as a charge from the lender for allowing to borrow money. The amount of the loan you borrow is considered the principal amount. The lender adds interest to that. The interest associated with your loan is a reflection of your credit score. The better your credit score than the lower your interest rate will be and the less money you end up paying.

There are a few things, other than your credit, that impact the interest rate you receive. Interest rates change, but only some rates are set by the Federal Reserve. Personal loan interest rates are usually set by the lender. They issue a benchmark rate, which is what the banks use when lending money to each other. This is also the rate off which they base their own interest rates. They know they have to be competitive and smart about the rates they set. They want their customers that have money collecting interest in their banks to receive the most value. This is how they keep them as customers.

They also know they have a lot of competition and have to keep their loan rates at a reasonable amount. It is important to have basic knowledge about loans and understand how they impact you. Remember, interest is what is added to your principal loan amount. A lender determines what interest rate to charge you based on your credit score.

What Does My Credit Have To Do With It?

I keep mentioning your credit score, so let me tell you why it is important. As I have mentioned a few times, your credit score directly impacts the interest rate you receive. Your credit score may seem like an insignificant three digit number, but it is a huge deal. Your credit score is prominently displayed on your credit report. Your credit report is a detailed listing of all of your activities involving credit. It shows your payment history, how much debt you have and how you use it.

It shows the age of your credit. It shows all of your late or missed payments. It even shows loans on which you have defaulted. All of these items listed on your credit report impact your credit score. It is built, or destroyed over time and gives lenders an indication of your credit worthiness. It takes hard work to build your credit score. However, it only takes one or two missed payments to send it downward.

Typical credit scores range from 350 to 850. A perfect score of 850 is difficult to achieve. Most people have a credit score somewhere between 600 to 750. Good credit falls somewhere between 670 to 800. Anything below 570 falls into the danger zone of bad credit. When you have bad credit, it is much harder to get a good interest rate. You may find it is difficult to be approved for a loan. Lenders feel those with bad credit scores are not able to avoid defaulting on a personal loan.

Should I Consolidate My Debt?

Consolidating your debt may help you avoid defaulting on a personal loan. When you consolidate your debt, you are taking all of your individual debts and creating one large debt. This requires taking out a personal loan large enough to cover all of your combined debts, or using a debt consolidation firm. There are some obvious advantages to this. You are able to focus on one payment, instead of many different payments.

You may be able negotiate a lower interest rate on the new loan than what you are paying on your other debts. Right now, you may only be able to pay the minimum payment, which does not help you pay off the actual debt. Consolidating your debts allows you to chip away at bigger pieces of your debt. If you feel like you cannot make any of your payments, debt consolidation may help you avoid defaulting on a personal loan.

Is There A Negative Side To Consolidating My Debt?

As with anything, there is no guarantee that you can avoid defaulting on a personal loan by consolidating debts. Debt consolidation is not for you if you are trying to avoid defaulting on a personal loan. It only helps if you have multiple bills or loans that you are trying to combine together. It will not be much help if you only have one loan. Often interest rates are higher for debt consolidation loans. You may wind up paying a high amount for your monthly payment. You should keep in mind that debt consolidation is not quick. It will still take you a long time to pay off your debts.

Not all debt management and consolidation programs work in your best interest. Forbes magazine lists many debt consolidation programs that you should avoid. Some of them will make no payments on loans and credit cards while trying to negotiate with them. This can negatively impact your credit because it is seen as you missing payments. It does not matter that you have a company trying to negotiate a better deal for you.

One of the major cons to debt consolidation is it gives you the feeling that you have paid off your debt. Your credit card balances are zero and your other loans are paid. However, you still have a major debt to pay. You can run the risk of beginning to use your credit cards and racking up large debt again. If you choose to consolidate your debt, you must be careful not to fall into the trap of using your credit cards again.

Conclusion

The best way for you to avoid defaulting on a personal loan is to carefully consider every loan and credit card you use. If you have a clear understanding of your budget and your finances, you can spend wisely. If you know what you can afford and you do not live about that, you should safely stay out of the danger or defaulting on loans and impacting your credit. Emergencies come up and we cannot avoid them. However, you can be smart and do your best to prepare for them. You can take a look at your budget today and make cuts to help improve your finances. It is never too late to take control.