Personal Loan Cost: Breaking Down Interest Rates with an Example

Sometimes in life, you just need a little extra money. When you do not have time to earn it with a job, you might turn to your credit cards. If that does not cover it, you take out a personal loan.

But, wait. A personal loan? Aren’t those tough to get?

Yes and no.

It can be hard to qualify for a personal loan if you have little to no credit. It also makes it tough if you have bad credit.

That does not mean that you cannot qualify for a loan. It does mean that you will need to look a little harder and apply for a few more loans than someone with excellent credit.

Even those with bad credit can obtain a loan. Okay, not a prime loan, but a loan.

What does it mean for a loan to be prime?

Prime refers to the interest rate of the loan. A prime interest rate refers to the lower, very desirable interest rates.

These interest rates go to prime borrowers. The term prime borrower refers an individual with excellent or very good credit. Their credit score is in the high 700s or low to mid 800s.

Individuals with scores beneath that level receive sub-prime interest rates.

The term sub-prime interest rates refers to the higher interest rates that go to individuals with good, fair and poor credit. Those individuals typically have a credit score of 719 or less.

Determining Personal Loan Cost

Typically, the average annual percentage rate ranges between 10 and 28 percent. These rates change each year. The above rates are for 2019. In some years, they drop as low as five percent. On the other hand, some years they rise all the way to 36 percent.

Other stuff goes into which interest rate you get. It is more than how creditworthy you are. Your credit score does mean a lot, but these other items also go into the formula used to determine your interest rate:

  • the length of the loan,
  • how much money you are asking for,
  • the lending institution.

The greater the amount of money you need, the higher your APR will be. The same is true of requesting a long loan term. That translates to higher risk for the bank because more people typically default on larger loans and those that take a long period of time to repay.

Typical Loan Interest Rates

With really terrific credit and the right loan length plus loan amount, you could currently land a rate as low as 2.9 percent from Backed. You can do almost as well with LightStream which offers a 3.99 percent interest rate when you set up auto pay for your monthly payments. Those rates aren’t typical. You should not expect to land a rate like that. Personal loan cost varies widely.


If you have really great credit and the stars are in alignment, you can score an interest rate of 5.99 percent or 6.99 percent. Best Egg, FreedomPlus, Marcus, Payoff, Peerform,, PNC Bank and Upgrade all offer the 5.99 percent interest rate to their best applicants. The 6.99 percent rate you’ll find at Discover Personal Loans, Earnest, Santander Bank and TD Bank.

While many banks and credit unions offer competitive interest rates, you will typically receive the lowest interest rates at online lenders. Online lenders also typically prove more amenable to applicants with lower credit scores. Some will loan to people with scores as low as 580 though the personal loan cost will be higher.

Apply to credit unions that offer alternative lending programs. These typically offer low interest rates to individuals with poor credit scores. As I mentioned in a previous article, these credit unions leverage their not-for-profit status to charge lower interest rates than banks. Next to online lenders, credit unions are the most likely institution to loan you money.

You can put it all on a credit card, if you happen to have an amazing credit score. This could land you a zero percent balance transfer credit card. So long as you can make the payments, you can save money on the interest while the introductory rate remains good.

The Importance of Your Credit Score

I cannot overemphasize how vital your healthy credit score is to you obtaining a good interest rate. While a great score can get you an interest rate in the low, single digits, people with those awesome scores are pretty rare. Most people have fair to poor credit. That’s because as a country, the US has become addicted to credit cards. Our habits, like our blue jeans, have traveled to other countries and now, people the world over struggle with credit burdens.

Since most people have fair to poor credit, they will qualify for the higher interest rate loans. Typically, the interest rates they get fall between 18 percent to 36 percent.

Some lending institutions will turn down applicants with no credit history or a credit score of less than 580 for a conventional personal loan. If this happens, turn to a local credit union or a nonprofit financial assistance organization. Skip the loan sharks and the payday loans. The APR for both borders on ridiculous. Avoid accepting a loan with an interest rate that you cannot afford to pay back.

Personal Loan Cost: Interest Rates by Credit Score
Credit Description Credit Score Interest Rate Range
Excellent 720 – 850 10.3 – 12.5%
Good 680 – 719 13.5 – 15.5%
Average/Fair 640 – 679 17.8 – 19.9%
Poor 300 – 639 28.5 – 32.0%

Personal Loan Costs: Determining What You Can Afford

The smart way to apply for personal loans is to know exactly what you can afford first. That means developing a budget, if you do not already have one and sticking to it. Your budget lets you see what you have on a monthly basis to repay the loan. It has to be enough to cover both the interest payments and the principal every month, ideally with a small cushion. The great thing is that you can actually raise your credit score by taking out the personal loan you need, then repaying it in a timely fashion.

When you apply for personal loans, you have to know how the interest rates affect the amount you pay back overall and on a monthly basis. If you apply and only receive interest rates that are too high for you to make the payments, you need to consider other options. You may have to wait to take out a loan or you may need to acquire it from a private source.

How Do You Know How Much Loan You Can Afford?

Since it is to banks’ and credit unions’ advantage when you repay your loan on time, they provide free tools to help you plan for taking out a loan. These include loan calculators. These vary in complexity and detail. While you might begin your planning phase of your loan search with an easy to use calculator that uses basic information, it is to your advantage to then move on to the complex, more detailed calculator after the fact.

Personal Loan Calculator – Easy to Use

BankRate’s APR Calculator: You need only three simple numbers for this calculator. You can quickly broad brush a few loan scenarios.

Personal Loan Calculator – Complex

Finder’s Personal Loan Cost Calculator: Finder’s much more complex calculator requires between seven and 10 inputs, but it provides you very exact information that lets you build an accurate picture of what you can afford. After using it, you will know what interest rates and loan terms you can accept and still expect to pay them off on time. Taking out too large a loan places you in jeopardy of not being able to repay it.

Lower Your Personal Loan Cost

You can increase your likelihood of loan acceptance and obtain a better interest rate with a few techniques. Some involve your loan search while others involve agreements with the financial lender.

  • Use a co-signer. Backed offers extremely affordable personal loan interest rates, but it requires the borrowers to use a co-signer to qualify for them.
  • Use comparison shopping tools to ease your loan search.
  • Take a second job or side gig. Use the pay stubs from the job to enhance your loan application.
  • Pay down your credit cards while you search for your loan. The less credit you have out, the more likely you are to obtain a favorable set of loan terms.

I talk as if your loan search will take some time. It probably will. Only the tiny percentage of people with exemplary credit can typically qualify for the loan they need on the first try. You should expect to shop around for a loan for at least a few weeks. That includes your creation of a budget, research into interest rates you can afford, the actual loan applications and the loan approval process.

Sure, there are online loans you can obtain and they advertise they will deposit the loan amount directly into your bank account within 24 hours. Some say 48 hours. Those loans prove some of the most costly. They have extremely high interest rates.

Your goal should be to obtain a personal loan that costs a reasonable amount with a loan term that makes it comfortable for you to pay back. Certainly, if you have to have the money, you may have to take what you can get, but you should make the concerted effort to obtain a conventional loan first.

Meeting with a Loan Officer to Reduce Personal Loan Cost

If you have made your loan applications and the interest rates your potential financial lenders provided turn out to be more than you can afford, you still have some more options to reduce your personal loan cost.

Ask for a meeting with a loan officer. During this meeting, the officer will consider your employment status, history and proof of income. They will also consider the employment type: full-time, part-time or self-employment. You will need to submit proof of these income streams in the form of pay stubs or W2s. Typically, they want to see at least six months. You will also need to provide your last tax return.

Some lenders require a minimum household annual income. If you do not meet this criteria, there is no reason to apply. It will only hurt your credit score by creating a hard hit to your credit report, officially referred to as a “credit inquiry.” Depending on the lender, the minimum ranges between $20,000 to $40,000. While credit card applications often take your word for it or reference your credit report, the same is not true of financial lenders for personal loans. Meeting the income minimum does not lower your personal loan cost. It just means you can apply for the loan. You will need to submit proof of your annual income to the lender.

Reducing Personal Loan Cost: Finding the Best Rates

You can use websites called loan malls to make finding viable lenders easier. Two of these are and Neither site makes loans. Neither site is a financial lender. Both sites simply work like a shopping mall for loans, helping you find personal loans online easily.

Each site lists lenders that make personal loans. Loanry essentially may connect you with lenders that offer more traditional, conventional loans. Cashry focuses  more closely on lenders which make cash loans with a quick turnaround. Which site you use depends upon the type of loan you need.

Loanry works better for finding loans in larger amounts. Cashry specializes in small cash loans and fast loans. Both are effective for personal loan shopping.

At both, you will complete a short, succinct form that requests very basic financial and identity information. This creates a soft inquiry to your credit report. It does not “ding” your credit, so there is no effect on your score. We also partnered with Fiona to make sure we connect you only to reputable lenders.

And now what?

From this information, the company searches the lenders in its database for those that match your needs. These lenders offer you the closest match to your needs. If you meet the lenders requirements you may get the loan you need. While Loanry and Cashry do not make loans and they do not promise you will get a loan from a lender at their mall, they can make the loan shopping process much easier.

It not only saves you time to use these loan malls, it saves your credit score. The soft inquiry that the loan mall makes does not appear on your credit report nor does it affect your score. It does draw enough information to determine which lenders would be most likely to extend a loan to you.

Using these items to find potential lenders can help reduce personal loan cost. It makes sense to use every Internet tool available and all the credit score enhancing techniques possible to reduce your personal loan cost. Why pay more? It makes no sense. As with anything in life, common sense tells you to look around and find the best deal. This is especially true for finding a personal loan.

What Goes Into Your Credit Score?

Credit score basicsYour credit score and your monthly income comprise the two largest contributing factors to whether and which loan you obtain. While financial institutions examine a number of data points when deciding whether to loan you money, your credit score carries the most weight.

So, what goes into those three little digits that make or break your ability to take out a loan?

The credit reporting agencies look at your credit history, typically going back seven years, your employment status, your income, your extended credit, the number of credit inquires to your account, your payments schedules and whether or not you paid on time. All of that feeds into a formula that spits out a three digit number that defines you as a person to every financial institution.

You aren’t a nice, hardworking individual with three kids and a mortgage. You are 785. To them, that says you do pretty well paying your bills on time. You probably are not late with your payments. And, you might not have made the 800s because you and your spouse took out quite a few credit cards and maxed a few, maybe most, out. You always make the payments though even if you only make the minimums. The bank looks at the credit score, your employment and your debt-to-income ratio.

There’s a classic rock song by Bob Seger that says, “I’m not a number.” Ah, but you are to the banks. You are 785 or you are 665 or 540. Those three digits say so much to the loan officer who sees them. They know what goes into the formula calculations, so they know what is up when they see the number.

They also know that the credit reporting agencies update the number every month. Every month, each credit card or financial institution with whom you have a loan reports to them if you made your payment, how much you paid and when you paid it. They know if you are late by even a day. They are kind of like Santa Claus or God in that sense.

Improve Your Credit Score Fast

7 tips to increase your credit score

That is the bad news and the good news. Just as the bank knows that your credit score reflects an accurate and timely picture of your finances, you can alter the score quickly with a few steps.

Do Not Be Late with Your Payments

First, make your payments on time. Seriously, that’s it. Poof. Your score goes up. Every month you do this, your score goes up. In six months of this, you can increase your credit score by 30 to 50 points.

Check Your Credit Report Regularly

Second, check your credit report. The score plugs into bank formulas for easy calculation. The financial institution also gets a lengthy report that shows exactly which lenders have extended you money and how much and when you paid late or on time.

You can get this same report for free. You read it very carefully and make sure that all the information on it is absolutely correct. Anything that looks hinky or incorrect, you report to the agency. This requires filling out a rather lengthy form online, signing it in blood and providing proof you are really you. I am kidding about the blood. It does take a while to complete, but it is worth it because once you report the inaccuracy the agency investigates. If the information is genuinely wrong, the agency removes it from your report. That typically increases your score.

What kind of things should you question? Definitely any accounts you see that you do not recognize. Yes. This actually happens. Identity theft occurs frequently. You should check your score at least every six months to ensure that your report remains accurate.

Also, check your payment history on each credit card. You might see a report of a late payment that you can prove was made on time. A few years ago, one of the major credit card banks got into major trouble because it was reporting consumers as late because they made a telephone or online payment after 5 pm in the time zone of the main office of the bank. This did not go over well with the government and that bank has since paid reparations of late fees it charged its customers who did, indeed, make their payments on the day they were due. The way the bank was caught was consumers like you reporting to credit reporting agencies the incorrect information which threw up a red flag.


Third, consolidate those accounts. You can pay them off much more quickly if you consolidate using either a consolidation loan or a non-profit agency that offers bundling of your credit accounts in exchange for making the payments through them.

Dave Ramsey quote

Explaining the Debt-to-Income (DTI) Ratio

Your debt-to-income (DTI) ratio also contributes to your personal loan cost. Financial lenders use this to evaluate applicants. The DTI ratio refers to the amount of debt you carry compared to your pre-tax monthly income. This includes all debt, so your house payment or rent counts. Lenders like individuals with a DTI of less than 45 percent. That lets them know that you have plenty of disposable income.

Let’s say you have a monthly pre-tax income of $4,000. Housing, plus your other loans and credit cards comprise a monthly total debt payment of $1,200. Divide your debt payment by your pre-tax income to get your DTI.

1200.00/4000.00 = .30 or 30 percent

Final Thoughts

Whatever the reason you need the loan, whether it is an emergency medical procedure, a vehicle purchase, your wedding or something else entirely, bringing down your personal loan cost makes good financial sense. With a little work, you can obtain the funds you need at a loan term and interest rate you can easily repay. Start by creating your budget, then conducting research on interest rates you can afford. Finally, use Cashry or Loanry to find potential lenders, then apply. You might need to request a meeting with a local loan officer, but this can help you get a better interest rate and that, ultimately, creates a more amenable personal loan cost.



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.

Interior of living room with TV.

Saving vs Financing

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 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.

Retro TV character with coins isolated on white background.

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:

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.

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.

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.

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:

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.

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.

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.


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.


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?

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.

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.

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.

Modern consumer electronics on white background.

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:

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 card iconCredit 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.

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.

Store iconIf 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.

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 a 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.


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.


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 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.

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 and 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.


Including a Personal Loan Payment in Your Budget

Most of us have considered taking out a personal loan for one reason or another. We may have a big expense to cover like a wedding, a new car, or even the birth of a child. The loan itself is usually not the point of concern for most people, however. Most people wonder how they will fit a personal loan payment into their budget. This can be tricky if you’re already cash strapped and burdened by a lot of debt. However, it can be done. A personal loan can often be beneficial to your credit if it’s handled properly.

In addition to helping you afford a big purchase or investment, it can also help build your credit if you make your payments on time and follow the terms of your loan. As a result, it’s a good idea to understand how personal loans work and why having a budget is essential to effectively maintain a personal loan.

Make a Plan For a Personal Loan in Your Budget

There are many reasons why a person may be led to apply for a personal loan. For many, an unexpected expense may come up that supersedes their credit card limit. For others, they may not have a credit budget that will allow for a particular purchase or they may not have a credit card. In addition, you may want to start your own business and lack the funds for all the things you’ll need to do, both planned and unplanned. In addition, some of the reasons for seeking a personal loan may be to simply sustain yourself or your family during a financially difficult time. For example, you may be interested in getting a personal loan to pay your rent. Regardless of the reasons, there are a variety of different situations that may lead a person to seek a personal loan.

Knowing Your Budget Before Getting a Personal Loan

Most of us have a budget that we adhere to on some level. If you don’t, you should. A budget is your financial roadmap. It helps you maintain your lifestyle and pay for the things you need as well as want. This is why it’s a good idea to create a budget if you haven’t already. Creating a budget helps you to create a financial roadmap that guides what you can and can’t afford. In addition, before you apply for a personal loan, it may be a good idea to use a loan checker. A loan checker is a tool that helps you to determine how much you can afford to borrow.

This is a beneficial tool because every credit inquiry has the ability to negatively impact your score, especially if your loan application is rejected by a lender.  A rejection also means that you will probably end up applying for another loan which will result in another credit inquiry. Another inquiry may also have a negative impact on your credit. Use a loan checker to determine how much loan you can afford. This will help you to determine the best amount to borrow and may help improve your chances of getting approved for a personal loan. This should be a part of your budgeting tool. This tool will really show you how much you can afford to borrow based on your current financial situation.

Or, 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.

Your Budget vs. Your Personal Loan

Logically speaking, your existing budget has to cover both your current obligations and your personal loan payment adequately. This means that there are two factors that you need to consider heavily: How much you need to borrow and the amount of Personal Loan Payment you can pay back monthly and still cover your other financial obligations.

Before you fill out any paperwork, these are the two factors that you should actively research and consider. Keep in mind that shorter repayment terms coupled with a smaller loan amount will produce a cheaper interest rate. Once you’ve considered all these pertinent points, you can effectively determine how much to borrow and for how long. This lets you know how much your personal loan payment should be in order to comfortably fit into your budget.

We really like this budgeting application from Every Dollar. They have great features that connect with your bank account. Just drag your expenses to the right spending bucket to begin. Beyond budgeting, here are some other financial apps we really like…

Consider Your Interest Rate

Most of us understand that the interest rate applied to a personal loan greatly determines how much you will have to repay. This is why this is an extremely important area to consider. Typically, banks offer smaller interest rates for larger loans and bigger interest rates for smaller loans. However, it’s best not to borrow more than you actually need and to carefully negotiate an interest rate that won’t increase your repayment amount excessively. This is why you should pay close attention to the annual percentage rate (APR), which is the amount of interest that will accrue and be added to the original loan amount. If you need to borrow less than five thousand dollars, consider other borrowing options besides a personal loan.

Three Additional Considerations…

Sometimes, it may make sense to borrow a little more if you can benefit from a lower interest rate. Conversely, it may sometimes make sense to borrow a little less if it means that you can reduce the amount of interest that your loan will accrue. However, if you want to borrow a particularly small amount of money, a personal loan may not present the best option due to the fact that the interest rate may be a bit higher. You may want to consider other options if you need to borrow a relatively small amount of money. A credit card or some other form of a loan with more flexibility may be a more viable option.

Advertised Interest Rates

The interest rate you’re approved for may be different from the interest rate advertised. Several variables determine the interest rate a person may actually pay. A person’s creditworthiness will determine the interest rate that a lender will offer as well as whether or not the lender will offer a personal loan at all. In other words, advertised interest rates are not guaranteed. Interest rates are based heavily on your credit score.

Budget Budget Budget

The key to managing your personal loan is budgeting. They actually go hand in hand. However, many people don’t understand why this is important and exactly how a budget should be created and how it should work. However, it’s not difficult. Budgets set guidelines for spending and let you know when to cap your spending. The most effective budgets are simple and function by helping you keep an eye on where your money is going.

Creating Your Budget

Divide your expenses into categories. Use broad general categories because it’s easier to track your spending. Your budget should help you to set aside money for your bills and other necessities as well as your Personal Loan Payment. The budget you create should help you to appropriately divide your expenses and Personal Loan Payment into groups that allow a certain amount of money for each bill or necessity.

A Personal Loan Payment is another bill. As a result, you may need to work on your budget and possibly cut back in other areas to effectively cover your Personal Loan Payment and your other expenses. In addition, there are many apps that can help you create an effective budget regardless of how much money you make. Keep in mind that your Personal Loan Payment will have to fit in with all the other bills that must be paid.

Step One

Create your budget before the month begins. Anticipate irregular payments that you may have to make. This will help in the event you have to rearrange your bills. If your bills are consistently the same from month to month, use your default budget as a foundation and make adjustments as needed. Your Personal Loan Payment should always be figured in. If necessary, less important bills can be rescheduled or worked out. However, make sure that you make your Personal Loan Payment on time. Late payments and missed payments reflect poorly on your credit and may have more of an impact than a late utility payment.

Step Two

Create a budget that exhausts all of your income. In other words, budget every dime of your money. Account for everything. In essence, this is similar to having a GPS that allows you to track everywhere your money goes. You can put your budget together by combining all your income sources. The first set of bills you should consider are your fixed expenses, like your Personal Loan Payment. This also includes utilities, groceries, and other expenses that accrue on a monthly basis. Next, track all of your other common monthly expenses like your household purchases and entertainment. Make sure every cent is accounted for. If you still have money left over, put it towards your savings or your Personal Loan Payment.

Step Three

Keep a close eye on your spending habits. This will ensure that you’re not overspending and that you’re adhering to your budget. This will also alert you if you have some out of hand spending habits. If there are areas where you’re overspending, recommit to your budget or increase it if the reasons are compelling enough. In addition, make adjustments to your budget as needed. A good budget is one that adequately fits your financial situation. As your finances change, your budget should too.

Be Realistic!

Your budget should be functional and reflect your needs wants and financial goals. However, they must also reflect your current monetary status. If you’re in a period where conservative spending should be an obvious goal, make sure your budget reflects this. In other words, eating at five-star restaurants shouldn’t be a part of your budget if you’re barely scraping by. This is especially significant if you have a Personal Loan Payment that you must honor. Failure to meet your financial obligations, particularly your loans, can result in financial ruin. Be responsible and spend accordingly.

The Unexpected

There are always going to be unanticipated situations that pop up and may place demands on an already strained budget. This is why it’s a good idea to budget for the unexpected, as much as you can. You may want to create a miscellaneous budget for these unexpected happenings that can often occur in life. Even your personal loan payment can become hard to pay if you fall under financial hardship and don’t have money set aside to cover the cost. This is why it’s a good idea to budget for the unexpected as well as the expected.

How Do Personal Loans Work?

A personal loan is different from a car and house loan, or any type of loan designed for a specific use. People take out a mortgage to buy a house and apply for a car loan for the express purpose of purchasing a car. A personal loan can come from credit union, bank, or online lender. Generally, they are paid for in two to five years. In essence, a personal loan can be used for any purpose and doesn’t require any collateral. However, it is possible to get a secured loan backed by your car or home which often means that the interest rate may be lower. However, generally speaking, a personal loan does not require any collateral, unlike buying a house.

A personal or consumer loan can be used for any purpose from paying off a high-interest credit card to funding the next family vacation. Typically, personal loans tend to have lower interest rates than credit cards. This is one of the reasons why they are attractive. Once you’re approved for a personal loan, you get the requested amount in one lump sum and make personal loan payments until it’s paid. Although personal loans are fairly simple and straight forward, you should pay attention to the terms and negotiate the best possible interest rate. The terms of a personal loan can vary from lender to lender and this is why it’s important to do your homework and read the fine print.

What to Watch Out For?

As part of your homework, it’s a good idea to know what to watch out for before you take on a personal loan. Familiarize yourself with the pitfalls. One of the things you should pay attention to are excessive fees. Many lenders will charge an application fee in addition to other fees that may add up. However, there are additional fees that you should pay attention to as well and these fees can be quite high. You may be offered loan insurance which would cover your personal loan payment if something were to happen to you or in the event of your death. This insurance can create peace of mind but it will come at a cost. Can you truly afford the cost of this peace of mind? If so, no problem. However, soberly consider whether or not you can afford this cost in addition to your personal loan payment.

Keep in mind that these fees add up and some can be quite expensive. Use wisdom and never lose sight of your budget and how much you can afford to pay. It should be noted, however, that most lenders won’t ask for upfront fees before you get the loan. The fees you’re charged after you’re approved for the loan will be a part of your loan and they won’t be asked for in advance. However, pay attention to

Buyer Beware!

Common Personal Loan Traps: Fees, Rates, Oh My!

Part of your homework is to keep a close eye on any and all fees a loan may require, in addition to interest rates and terms. However, there are other things that you need to be aware of as well. Any lender that has a legitimate shingle must be registered in the state that they are doing business. In other words, even if they are licensed to do business in another state, in order to legally operate as a lender, they must also be licensed in the current state they are attempting to operate a business in. As part of your do-diligence, make sure that the lender or lenders you are considering are legally licensed to operate. Keep in mind that the rules for lenders will vary by state, but licensing is required in every state which represents a different jurisdiction.

People with Bad Credit Often Opt for…

In addition, many people who have low credit scores or no credit, often opt for fast loans to help solve some of their financial woes. They may consider these types of loans because their credit is not good enough to get a personal loan. However, although its often quick and easy to get these loans because they are based on your job and the amount of money you make, they often carry large interest fees. These interest fees can be quite high and just how high they are can vary from state to state. Each state has its own rules and guidelines. Furthermore, it’s best to avoid these types of loans because they are often seen as predatory because of the terms and the extremely high-interest rates. If you choose to take out a fast loan, try to pay it off as soon as possible.

The longer you have it the more interest you accrue on these high-interest loans. Often, your personal loan payment for a fast loan is nothing more than the interest. In the end, you’ll still end up paying the original loan amount in addition to the high-interest rate.

Worst Case Scenarios

Getting approved for a personal loan can eliminate a lot of financial worry for people. In addition, a personal loan can be beneficial because the interest rates are often lower than credit card interest rates as well as other types of loans. However, regardless of how little you have to pay, if you don’t have the money to make your personal loan payment it can be very stressful and scary. Most of us would worry about the consequences of not being able to make a personal loan payment.

Life can throw us many curveballs, and a personal loan payment that was manageable before can become difficult if we lose our job or have to pay bills for a loved one. The wide variety of situations that can occur that could change our financial status can be limitless. However, if you do fall on hard times and have to make a late payment, miss a payment, or find that you can’t pay your loan back at all, be sure to talk to your lender as soon as possible. There may be things that can be done in the event of an unforeseen and unfortunate circumstance like this. In some extenuating circumstances, a lender may be able to offer you a moratorium. This is an extended period where loan payments aren’t required and you aren’t penalized.


However, your lender may not give you a reprieve for a missed payment or for your inability to pay back a personal loan. If you miss a personal loan payment, you may be faced with the possibility of defaulting on your loan if it is more than two weeks late. Many lenders have a two to four week grace period for personal loans. During this period, additional interest doesn’t accrue. However, if your late payment exceeds the two or four week grace period, you may begin to get letters regarding default from your lender and your credit score could plummet as much as 150 points. However, most lenders won’t threaten default until your personal loan payment is ninety days late.

A Personal Loan and a Budget should Go Hand in Hand

You shouldn’t apply for a personal loan without a commitment to maintaining a budget. A budget will ensure that you can make all of your personal loan payments and maintain your other financial obligations as well. Plus, a budget helps you to determine how much loan you can afford and reasonably fit into your current lifestyle. Failing to budget is similar to planning to drop or neglect a financial obligation which could result in unsatisfactory changes in your credit and in your lifestyle.

If you have a family, this could mean the difference between putting food on the table, paying your rent or mortgage, or simply having enough money to pay for a much-needed car repair. Before you take out a personal loan, commit to creating a budget if you don’t have one. If you do have one, stick to it and make adjustments as needed. All of these actions will help you consistently make your personal loan payments and effectively manage your finances.


A personal or consumer loan is a big responsibility, even though the financial benefits can be quite helpful. However, a personal loan requires a certain level of personal responsibility and that begins with a thorough understanding of how personal loans work and a solid budget to ensure that you can meet the terms of your loan agreement.


What is a Secured Loan and Are You Secure?

In the last couple of months, my family has run into what seems like every financial roadblock possible. Though we work hard to keep our heads above water, there are times that there is nothing more that we can do to prevent some financial problems. More times than I care to count, we have found ourselves considering loans and how they might help us improve our lives, even if it is just to ease the burden for a moment.

As much as I wish it were not true, we are not alone. Financial stress and difficult times seem to affect a lot of people, and they always have. Why else do you suppose there are so many available loan options and lenders? It would not be such a large industry if only a few people needed it.

While there is no shame in needing help, loans tend to be a bad move for many people. From my experience, I believe that is because many borrowers do not necessarily understand the loan that they are receiving, do not understand the different loan options, and sometimes because they simply cannot repay it.

At times, borrowers are not even sure what they need to apply for, and this is often due to a lack of clarity on the numerous terms and what all of these loan options really are. I have quite a few friends that have complained that the loan industry is an overwhelming and confusing place. If you have ever tried to navigate it blindly, you can most likely relate.

We want to make sure you have all the clarity you need to make good financial choices, so we put together this little guide on one type of loan that many have heard of but few fully understand secured loans.

Everything You Should Know About a Secured Loan

A secured loan is a loan for which you temporarily trade ownership of something, i.e. collateral, in exchange for the borrowed money. The lender requires collateral for secured loans so that if you do not pay as you should, they have the right to sell your collateral. This prevents them from risking much more than the time it will take to repossess and sell the item.

A secured loan is not always as handy as an unsecured loan, as you will see as you read through this article. They require extra paperwork, extra consideration, and often extra time. In addition, the borrower is not always receiving the full amount of said loan. Secured loans do have their purpose and place though, and they have helped many a borrower improve their financial state. They provide an avenue of borrowing for people whose credit history and score block all other ways.

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What Type of Credit Score Do I Need to Be Approved?

In short, pretty much any score. The beauty of a secured loan is that, generally speaking, your credit will not prevent you from getting approved. While lenders differ in their requirements, your credit score is often one of the lowest factors in a secured loan credit decision. The collateral you can provide and your ability to repay are much bigger factors. If you have some type of collateral that is valuable, which we discuss shortly, you will likely have no trouble locating a lender.

Though it is usually not a big factor in the approval decision, a secured loan with bad credit might affect your interest rate, loan repayment terms, and the collateral required. The lower your credit score, usually the higher your deposit or required collateral. Sometimes, you have to put an equal amount of collateral as what you borrow. For instance, if you get a secured loan through a bank for $500 and your credit is bad, the bank may require you to put $500 in an account that cannot be touched until you pay off the loan.

Secured Loans for Bad Credit: Personal Loans 411

This means that if you are looking to get a loan to actually use for your bills, a secured loan may not be the best option. I mean, if you have to put the entire amount you will borrow up to for collateral, you are basically just swapping the money over. If you can afford to put up that amount of collateral, however, secured loans are a great way to build your credit. Although you have put up collateral, the financial institution will report your payments to the credit bureaus. Additionally, over time, your collateral may be released, or you may be able to take out the same loan without collateral after you pay the first one off.

What Can a Secured Loan Be Used For?

A secured loan is much like any other type of loan when it comes to using it. What you use the loan for is pretty much up to you. However, due to the fact that it is secured, it is best to consider this type of loan solely for the purpose of building credit. While you can use the funds for anything, keeping credit as your main goal is a wise move.

For instance, when I started trying to rebuild my credit a few years back, I was only able to qualify for a secured credit card at the time. Secured credit cards are built on the same principle as secured loans, meaning that they require collateral. I was approved for a $200 limit but had to put a $49 deposit down as my collateral.

In truth, the additional $150 that was left on the card would not go far, especially since they also took out a $39 annual fee. Instead of relying on it for needs, I simply used it as a way to build credit. I would pay the balance in full every month, and then, after the billing cycle closed, I would use the full amount to pay what I could. I would then pay it off before the end of the billing cycle so that I was not paying monthly interest.

Since I only used the card when I had the cash to back my payment, I did not get behind. Instead, this small credit limit helped build my credit up to the point that I could then get a small unsecured loan. Viewing a secured loan as nothing more than a way to build credit should help you use it responsibly instead of getting in any further debt.

What’s the Difference in a Secured Loan and an Unsecured Loan?

Difference Between Secured and Unsecured Personal Loans

The word “secured” has been used in many different ways, so the definition can easily be skewed. The difference in a secured loan and an unsecured loan is very simple: a secured loan requires collateral while an unsecured loan does not. We are going to break this explanation down a bit farther for good measure:

Let’s say your cousin asks to borrow $100 for gas and food until payday. You know his reputation and that he does not normally repay loans. He has done such a poor job with his finances in the past that no one in the family is willing to open their wallets. He has even borrowed money from you before and not paid you back. Logically, you know it probably is not a wise move but you still want to help him out. What do you do?

You could just give him the money, either as a gift or as a loan that you hope he repays. This is an unsecured loan. The other option is that you could say, “Sure, I can help you out. I will loan you $100 but I need to hold onto your laptop until you get paid. When you repay me, you can have your laptop back.” Though you may not want to, if he fails to repay you, you can use the laptop to recoup your losses. This is a secured loan since you are holding ownership for one of his belongings until the loan is paid off.

Special warning

If you were truly offering this secured loan, it would be very smart to get the terms in writing and notarized so you cannot be accused of stealing property. If you are anything like me, you love your family but have learned not to blindly trust them. Always be diligent when it comes to your finances, regardless if you are borrowing or lending.

What Type of Collateral do You Need?

This really depends on the financial institution you are getting the loan from. Both payday loans and title loans are secured loans. With a payday loan, the collateral is the check you fill out and give them. If you do not pay, they can simply deposit the check into their account and get their money back. With a title loan, the title to your vehicle is the collateral. If you do not repay the loan, they have the right to take your vehicle. The are other types of collateral as well such as cars, a home, and more. It is possible to find a loan for pretty much any asset you might own.

Be very careful when taking out this kind of Loan. If you can’t pay it back you risk losing you asset. You need that car to get to work! This is the case with Title Loans.

When A Secured Loan Makes Sense

  • Mortgages are secured given the house is the collateral if you can’t pay back the loan you foreclose and lose the house.
  • Auto loans are secured because like a home loan, if you don’t pay it back, you lose the asset.

There are cases where you can use your asset to get another loan such as a line of credit. You might have property that you do not even realize is very valuable. About five years ago, my husband and I decided to purchase a piece of land and the mobile home that came with it. Looking at this property, we knew it was not worth much, but it was a start in the home ownership path we wanted to take. The plan was to eventually build a house and tear down the mobile home.

Over time, we began to see what a money pit it was and began weighing out our options. We feared that since the piece of land was small and needed a lot done to it that we would never be able to resell it. We honestly assumed that it was worth no more than a few thousand dollars. Then, just last year, I had to gather some paperwork related to my property from the courthouse. To my utter amazement, the stated value on this paperwork was almost six times as much as we believed.

The Moral of This Story is to Never Assume You Have Nothing of Value

I have known people who have discovered many unknown assets. One friend discovered out of the blue that a book he owned for years was actually a very valuable first addition. A friend’s cousin inherited her grandmother’s jewelry. No one else wants the jewelry as they all assumed it was only costume jewelry. They were all surprised that tucked away with that costume jewelry was actually two very valuable rings.

When my grandfather was alive, he ran a truck stop. The items he kept there are now considered “antique”. Though I cannot see anyone wanting an antique icebox, there is a market for those items. For that matter, some very old plates I found at my grandmother’s home turned out to fit into that antique category, as well. Imagine my surprise when I discovered the plates we were eating from were selling on eBay for almost $100 each. Lesson learned: if you own something and are unsure of the value, do your research. You just might be surprised at the amount of valuable assets you own, and most of those can be used as collateral. Speak with your lender to determine acceptable forms of collateral for them.

Benefits of a Secured Loan

We have previously discussed that secured loans can be great for building and improving your credit, but there are a few additional benefits as well. One is that since you are putting up collateral, the lending institution is assuming less risk. This is beneficial because it generally means that the interest rates will be much lower.

Notice I said “generally”. That is because while many loan places do charge lower interest rates for secured loans, that is not always the case. Some actually charge much higher interest, such as title loans and payday loans . If you have never had the misfortune of needing one of these, consider yourself blessed. These are high interest downward spirals that you should avoid as much as possible. There is more detail on these secured loans below.

Other lenders will likely charge lower interest rates, but they will vary from lender to lender. To avoid really high interest rates, simply do research before signing any paperwork. Some other benefits of secured loans are that they are usually easier to get than unsecured loans because it is less of a risk and you can usually get approved for larger amounts.

Risks of a Secured Loan

VIDEO: Title Loan is a Type of Secured Loan

Like all good things, a secured loan has negative sides. First, as there is extra paperwork and assessments needed for the collateral, it may take longer to get approved and receive the funds. Second, as mentioned before, if you are putting cash up for collateral, as in a bank account, a secured loan probably will not be so beneficial for you in regard to bills. Lastly, there is the risk of losing property if you do not pay as you are supposed to. It is best to aim for unsecured loans if those are a possibility for you. If they are not a possibility, be sure that you make timely payments so that you never lose your property.

Terms and Interest Rates

When it comes to the terms and interest rates of secured loans, they can vary as well. Payday loans only give you until your next paycheck to repay the loan. Many payday loans, especially for first time borrowers, do not get approved for much more than $150, though it can go up higher. The highest I have personally seen is $500, but that was after the customer had borrowed money from that lending institution quite a few times. For the $150 payday loan, the interest came to almost $30. For the $500 loan, the interest hit $88. That is about 1/5 of the amount you borrow, which I consider to be a bit high.

Title loans also have high interest raising up into the $100s. However, they have longer repayment terms. In fact, you can literally pay on a payday loan for the rest of your life. The payment the lender requires each month is nothing but the interest, so if you feel like throwing your money away, you can just pay the interest every month. However, that will never touch the principle. If you go in for either a payday loan or title loan, be prepared to make some rather large payments.

On the other hand, there are many other secured loans out there with lower interest rates. In fact, some lenders, such as banks, will also hold your car title as collateral. The difference is the interest rates and the term. With a bank or credit union, the title is literally collateral and the interest on the loan will be about the same as it is for any other loan.

Let’s take an example

For instance, my mother borrowed $2000 from the bank at one point. She used her title as collateral but her payments on that amount came to only $141 per month, and she was to pay for somewhere around two years. This loan was basically a secured personal installment loan for which the interest was added from the beginning. The monthly payments she made were much lower than an actual title loan company charges, and the payment was working on the interest and the principle.

The key to finding a good secured loan comes from doing the necessary research. It is very possible to find a secured loan that offers reasonable interest rates and good payment terms. Often, though, the best ones are not the first ones that jump out at you.

Repaying a Secured Loan

Repaying a secured loan is as important as paying back any other type of loan. Though title loan and payday loan companies do not typically report to credit bureaus, it is not safe to assume that all secured loans are the same. In fact, with most lenders, a secured loan gets reported just as an unsecured loan does. Therefore, you must treat it like any other loan you borrow.

First and foremost, never borrow more than you can repay. Borrowing $1,000 to pay bills will not help if you are adding another bill you cannot afford. My family and I have been in some tight spots over the years. More than once, my immediate inclination was to apply for a loan. The more desperate we were, the more a loan seemed like a good idea. Fortunately, my brain would kick in and say, “If you are already this desperate, how much more desperate do you think you will be when a loan is due next month?” Finding your way out of one problematic situation just to put yourself straight into another one is never a good idea.

So You Absolutely Need a Loan?

If you absolutely need to take out a loan, calculate how much you can afford to repay each month and how long you think you will need to repay it. Be smart about it. Do not take out a short term loan if you cannot afford to pay the full amount back within a month or so, as that is about the length of repayment terms for short term loans. Search for a lender that can provide the monthly payment amounts and repayment terms that you need.

After you have taken the loan out, you should immediately adjust your budget to suit the payments. If you find that you miscalculated and cannot afford the payments, consider picking up some extra shifts at your job, picking up a side job, selling some of your possessions, or anything else you can do to help make the payments.

Also, be sure you as to when you are getting the loan whether there is a penalty for paying it off early. If there is not, consider paying the loan off with your tax refund, a Christmas bonus, or another piece of additional income. The sooner you pay it off the better. Remember that how you treat this loan can and will most likely affect your credit. Do not dig yourself into a deeper hole if you can help it. Be as committed to repaying your loan as you are to make a house payment or car payment.

What Do I Do If I Cannot Repay a Secured Loan?

You took out a loan with every belief that you could pay it back, and you had every intention of doing so. Then, you get blindsided- perhaps you lose your job, an emergency occurs, you get really sick and cannot work for a few weeks, or something else occurs that knocks you down. How will you pay your loan payment? You are already scrambling to pay your rent and buy some groceries. How on earth will you pay that loan payment?

I do not know about you but that scenario sounds awfully familiar to me. Even with the greatest intentions, life can surprise you and take the wind right out of your sails. If this happens to you, start by not panicking. I know that is easier said than done but you cannot think or act rationally if you allow your emotions to control your actions. You can always take a moment to let the emotions roll, of course. You just cannot stay in that place.

Personally, if I am blindsided with something negative, I allow myself to freak out for a day. I usually do not need that long but, in my experience, it is best to let your emotions go crazy for a moment before you try to solve a problem. In my case, within 24 hours or less of my issue, my logical brain kicks back in and suddenly: a.) things do not seem so bad, and b.) a solution seems to pop up out of nowhere.

So if you are facing a crisis, there are a few things I want you to do:

1. Give yourself permission

Especially to freak out- just do not stay in freak out mode for too long.

2. Take a look at your financial situation and assess

Look at how bad it really is. It is usually not as bad as it initially seems.

3. Determine when you can make a payment

Try to find time within a week or two, if at all possible.

4. Call your lender

Burying your head in the sand is not going to solve your problem. Believe me. I have a friend who got a little behind on his loan payment due to a job loss. The lender called continually to see when he could make a payment but he chose not to answer the phone. It was not really that he was ignoring them. He actually had a job interview coming up and wanted to see if he would get hired so he could tell the lender something concrete. Instead, they ended up knocking on his door. From that point forward, he almost could not speak to them anymore about his situation because he had blown their trust in him.

So, again, do not hide. Face it head-on. Call your lender and explain the situation. Also, share your solution with them. If you are having a yard sale over the weekend to make your loan payment, tell them. The more straightforward you are and the more they see you trying, the more likely they are to work with you.

5. After you have given them a date and all the information, do everything in your power to keep your word


Now that you have some 411 on secured loans, you may be asking where to get a loan. As I stated before, there are a lot of secured loan options out there with various requirements, terms, and so on. The best thing you can do is research any personal cash loans available to you to find the pertinent information. If you need the money quickly, refine your research to the term fast loans or quick cash loans. Your research can provide you with the necessary information. However, full disclosure: that research can take a lot of time that you may or may not have.

That is the beauty of Loanry- we have done the research for you. We are connected to a large network of lenders and are dedicated to helping you find a lender that suits your needs. Instead of digging around the internet for hours trying to find a lender, we have provided a platform that makes it easier to get the money you need.


Short Term Loans When You Need It Most

A short-term loan provides you with emergency funding. You have experienced a catastrophic one-time event or a temporary hardship? The loan helps you get by until additional funds are available.

Short Term Loans for Emergency Situations

Short term loans are offered by a variety of personal loan lenders with myriad requirements. They are an option when you need fast loans and cannot wait for traditional approval procedures.

Short Term Loans From Traditional Lenders

When you have good credit and need short term loans to overcome a hardship, consider visiting with traditional lenders first. If your bank or credit union can provide you with the funds, you are likely to receive better interest rates. Bank loans also enjoy more manageable repayment schedules than going through short term loan lenders.

Your bank or credit union is already aware of your financial situation. This allows you immediate access to the best loan terms possible given your assets.

In-person Application for Short Term Loans

Stop by your bank or credit union in person to speak to a representative familiar with your account or immediate access to it for research. By connecting with a local person, you also increase the likelihood of the lender reviewing all possible avenues for you to obtain funding.

A local bank often has the same parameters for lending as a national bank but can find alternate ways to match you with the appropriate loan.

Short Term Loans and Credit Scores

For example, some banks or credit unions may not lend to you if your credit score is below a certain number or your debt to income ratio is too high. However, a local bank or any financial institution specifically reviewing your credit information can assess these variables both together and independently.

If your debt to income ratio is a little high but you have an excellent credit score those two can balance each other out. Likewise, a lower credit score with an excellent debt to income ratio would suggest that you are a responsible user of credit. A bank can then determine you are likely to repay the loan in a timely fashion.

When you are speaking to a person directly, you are more likely to encounter a little more flexibility in this area. Local representatives are able to review all of this with you in person without other demands.

For example, when you call a bank’s toll-free number it often leads to a call center. This means you encounter someone who is going through the standard script in terms of loan paperwork. If you don’t check all of the checkboxes, the representative is not necessarily going to research other options available. This makes the in-person approach best.

Benefits of Obtaining Local Short Term Loans

When you are researching short term loan options, visiting with traditional lenders like a bank or credit union is also instrumental because you may find yourself able to secure a better loan.

Short term loans may be what you think is best for you because you only need money for a brief time. However, a long-term loan may provide you with the funds you need while providing financial flexibility in terms of repayment.

For example, you took out a $6,000 loan to pay all of you bills for a couple of months of unemployment or to finance a vacation. This way you may be able to repay the loan quickly. When you can, it is a solid option. However, you will be temporarily reducing your cash flow while you repay the loan in full.

If you took out the $6,000 loan for a 12-month period, even without interest, you are facing a $500 per month repayment schedule. With interest, that total is going up.

While your budget may be able to handle the loss of $500 per month short-term, you will still be paying interest charges. Often, some of the higher interest rates allowed are charged on short term loans.

By investigating a long-term option, you may be able to find a more agreeable repayment schedule.

A $12,000 loan over a 60-month period – the type of loan you would typically get for a small car purchase — would only require repayments of $200 per month plus interest.

If you are concerned about the added cost of interest, review the terms of two different loan types. The higher interest rates of short term loans can quickly add up to the same rates charged over a longer loan period.

High Interest on Short-term Loans

In both, the business and private sector, short term loans can be viewed as inherently risky. A person needs capital quickly and doesn’t have access to liquid assets.

For business loan shopping, there are many lenders for short term needs. However, they often carry heavy qualification requirements. Such as minimum assets required and years in business. Interest rates are high and repayment schedules aggressive.

When the average consumer applies for consumer loans with traditional lenders, the requirements are also strict. You will need an excellent credit score. You might also need to be able to show the ability to repay the loan.

For those in a financial bind that necessitates considering this loan type, the requirements often cannot be met. If unemployment or an alternate emergency leads to you needing short-term financing, it still pays to research the possibilities.

Payday Loan Options for Short Term Loans

A payday loan is one of the more common short term loans. It provides a loan in advance of your paycheck with the premise being that you will pay it off when you are paid next.

Payday Loan Pitfalls

The problem with payday loans for some borrowers is the likelihood of renewing the loan week after week. Each time the loan is renewed additional fees accrues, increasing the balance and making it more difficult to pay off.

When the loan is taken out, an initial processing fee is often required. Interest is then added to this processing fee to arrive at the total you must repay the lender by the due date.

After you receive your next paycheck, the loan is due. If you cannot pay the loan in full, the lender will charge a fee for renewing the loan.

Basically, the entire amount is refinanced as a new loan instrument. This means the interest accrued on the initial loan is added to your principal. New interest charges are also added on top of the processing fee.

When you are in a financial bind, it is easy to renew these loans week after week or paycheck after paycheck. The short-term financial crisis you experienced that led to the loan being necessary often can create hardships for repayment.

It is also possible the full cost of the loan equals the full value of your next paycheck. This often makes it impossible to pay off the total without neglecting other bills.

Over time, the processing fees and interest charges add up. If broken down over the cost of frequently renewed short term loans, they often add up to repayment over twice the original loan amount.

This is How Payday Lenders Make a Return on High-risk Short Term Loans

To avoid falling into this trap, avoid taking a higher loan than you need.

Develop a plan to pay back the money as soon as possible and stick to it. Even if you must refinance the loan, you can pay back a lump sum every paycheck. This lowers the balance and reduces the amount subject to additional interest charges.

When a large lump sum isn’t possible, make it a goal to pay back all accrued interest, the refinancing fee and a portion of the balance. This ensures your total is always going down.

Short Term Loans From Local Lenders

A variety of local finance companies as well as web-based lenders also focus on the short term loan market. These chains specialize in installment loans at a low dollar value.

The loans may include an abbreviated repayment period. For example six months, or lengthier terms in excess of one year. Like payday loans, short term loans offered by these entities make money through high interest.

Short term loans generally target a low-income demographic with limited access to other financing options with more generous terms. This increases the possibility of default for the creditors. Without charging higher interest rates to those who repay and those who are currently repaying but will default, the enterprises would not be self-sustaining.

Qualifying for Short Term Loans From Direct Lenders

Most short term loans, particularly those offered by chain lenders, have well-established terms. Those will require some form of collateral. For many people, this means allowing the company to place a lien on a paid for vehicle, piece of equipment, or parcel of property.

The collateral provides the lender with some tangible property or asset the lending outfit can attach itself it to for collections. If you default on a personal loan, the collections process would include seizing the item and forcing a sell to cover the terms of the loans.

The qualification will not require the high credit scores other lenders require or a specific debt to income ratio. The repayment of your other debts will be considered heavily. The loan company uses this to determine your likelihood of repaying the debt in a timely fashion.

Paying off Short Term Loans

In addition to collateral, many providers of short term loans will want to connect to your bank account to withdraw monthly or weekly payments. In this scenario, it is possible you will face garnishment of your bank account when you fail to pay.

Whether or not the lender is connected to your bank account, when your account goes into arrears, they can tap it. As part of the collections process, a loan provider can go through the court system to access your bank account or paycheck. The bank account or your checks are then garnished until the terms of the loan of fulfilled.

Benefits of a Short Term Loan

When you possess the ability to quickly repay a short term loan, the instrument is capable of helping you out of a financial bind quickly.

Most payday lenders and small loan providers are skilled in making quick eligibility decisions. Many also provide funds immediately in the form of a bank direct deposit or via check.

For an emergency trip home, imperative dental work or a necessary medical procedure, this option will provide you with the money you need quickly. When time is of the essence, a short term loan for an emergency can get you on track as soon as possible.

As long as you possess the ability to repay the loan quickly, the additional fees will be easily absorbed by your budget. While the cost may be higher than other loan types, convenience may be more important.

Should You Use A Personal Loan for An Emergency?

How to Find the Best Deal on a Short Term Loan

Do you want to find the best deal on a short term loan when you have the time to research? Firstly, review your credit score and your existing liabilities and income. A credit shop or site with free access to your credit report can help.

When you have a credit score of 640 or above, you are likely to qualify for a range of short term options. Then choose and pick the best one. An even higher score will open the possibility of a long term loan you can spend more time repaying while your cash flow improves.

For scores less than 640, the options start to narrow. However, an established credit history and solid income can help you negotiate with a local lender.

At 600 and under, you are largely looking at short term loan specialists and payday lenders.

Researching Short Term Loan Options

To find the best option for you based on your current financial situation, consider using an online loan aggregator. These sites will take your basic financial information and present a variety of loans, including cash loans online, you could be eligible for.

Many sites will not require a hard pull of your credit report to provide a glimpse of the options. Instead, the individual lender you select will pull your report when you fill out a final application.

Look at the possible interest rates for each loan, the repayment schedule, and what your monthly or weekly payment will be. Pick a loan that provides a low cost of borrowing while keeping payments you can manage until your financial situation improves.

Credit Card Options

If your credit is okay, you may also consider utilizing a credit card as an alternative to a short term loan. While most credit cards maintain high-interest rates, the rates are usually competitive with those charged by short term lenders. They are also better than the higher rates and fees charged by payday lenders and cash loans based on your car’s value.

New credit cards often feature fixed or low-interest rate offers on introductory charges. They also routinely issue checks with promotional financing featuring similar terms.

Utilizing such an option provides you with the repayment flexibility of a long term loan. You can make lower monthly payments while you need to focus on your finances. After you move past your emergency, you can focus on paying the credit card off in full.

A benefit of this is the ability to improve your credit score. And gain access to a larger credit limit capable of helping you out in a future emergency.

Unlike qualifying for a short-term loan, you can keep a credit card you maintain a solid repayment history with for years and use it repeatedly. If you needed another short-term loan in the future, it would be necessary to reapply and meet all of the original terms.

Moving Forward From a Short Term Loan

By actively focusing on paying off a short term loan, you will suffer no financial repercussions for pursuing this option. In fact, a lender who reports your payment history to the credit bureaus can end up boosting your score for the long term.

This means you will qualify for more, better loans in the future. Instead of taking out a short-term loan to fix a clunker car or buy a used vehicle, you may find yourself qualifying for a full auto loan or leasing arrangement.

The key is to use any offer of credit you accept or any loan you take out to build a history of responsible usage. Avoid late payments and added fees, and you will benefit if you use a personal loan wisely.

After you pay off the loan entirely, work on other ways to build up your credit, such as responsible credit card usage, to expand your loan options for the future. Establish a savings account when possible to build a cash fund you can tap when the unexpected happens, and develop a cash flow that will allow you to help others in the future.


What Does it Mean to Default on a Personal Loan?

Before we get into the meaning of a default on a personal loan, let’s look at the numbers. It’s rare to find a business default on its loans, but in 2018 less than one percent did. Consumer loans or personal loans, on the other hand, is currently at a 3.63 percent default rate. The Federal Reserve only tracks bank loans, but personal loans have fewer requirements, thus are defaulted upon more often.

Delinquency rates (60 days or more past due) for personal loans is currently 3.63%. That compared to what the Fed saw in the first quarter of 2019 for other loans; 2.59% in credit card debt, and 2.12% delinquency rate in other types of loans.

The Department of Education reports that, in 2013, 11.5 percent of students making payments to repay their student loans defaulted on the loan after two years. Forty-four million students owe 1.5 trillion dollars in student loans, says Forbes, and student loan debt is the largest debt category following mortgages.

On the other hand, personal loan delinquency rates are relatively low when compared to historical numbers.  According to LendingTree, Personal Loan Delinquency Rates (60+ days past due) numbers “hit a high of 5.1% in 2009, the peak of the Great Recession.”

Those are the numbers. How is a default on a personal loan looked upon by lenders? For some lenders, default is missing one payment. For other lenders, it’s 30 days late, while more lenders tend to let some months go by before they consider a loan in default. Defaulting on a personal loan has consequences that lenders use without compunction to get their money back. What are the consequences?

The Legality Of Loan Defaults

First, you should know that a creditor can’t just toss you in the pokey for non-payment that puts you in a debt cycle. They must go through legal channels.


Before he does that, he’ll put your personal loan debt through collections. If, after some months, you default on a personal loan, he’ll put the debt out for collection. Debt collectors include lawyers, individuals, and companies that buy debts for collection. Methods of the collection include letters (some look like Western Union wires,) and phone calls.

It differs from collection company to collection company how long the calls and letters will continue. Most continue for 180 days. By that time, if the debtor (you) either refuses or simply can’t repay the consumer loan, the collector might sue you. The court will notify you of the court date, and it’s a good idea to show up. If you don’t, you’ll lose by default, and will end up paying not just the loan balance but court costs as well.

Another method of collection is selling your debt to a debt buyer. You will no longer owe the original lender. You will be dealing with the company to whom he sold the personal loan debt. This company will attempt to get you to pay up, so it won’t lose the money laid out to buy your debt. Be aware that there are law firms that buy loan debts. Letters and phone calls from lawyers tend to get most people’s attention, not to mention making their blood run cold. Either way, it’s a good idea to work with these people to pay off the debt.


Expect to be sued if you’ve borrowed a significant amount of money and your assets are equal to or more than the amount borrowed. If you own a business, for example, then your physical property could be seized as well as your accounts receivable. When you default on a personal loan, a judgment from a court can be collected for up to ten years.

Collecting On A Judgment

This is the only time a creditor can legally reach into your bank account to take money in payment of a personal loan debt. The creditor can also seize any personal property worth the amount of consumer loan debt. Maybe, but doubtful you’ll see a sheriff knocking on the door with a court order for seizure of real personal property.

If you own a business, then it may be within his legal right to come to your business and take whatever cash is there including that in your pockets. The court could also assign to the sheriff to collect monies owed to you by customers and give it to the court. He could also seize any business property worth more than you owe on it to pay for the consumer loan debt.

On the other hand, creditors could not bother with all these physical collections stuff and simply put a lien on any personal or business real estate you own. Upon the sale of the personal or business real estate, this “judgment lien” is paid first.

Now that you know all of this, it would be a good idea to show up in court. You can always work with the judge and the creditor to iron out a payment plan that works for all concerned. You may or may not be required to pay court costs, but if you do, it would still be cheaper than losing all your property to pay off the fast loans debt.

Garnished Wages

Another tool for the collection of a consumer loan debt is garnishing wages. There are rules governing this as well. The amount taken from your net pay (after taxes and deductions) will be 25 percent. This is if you owe on a consumer loan or fast loans. If you own a business and pay yourself as if you would an employee, then your wages could be garnished. If you aren’t paid much, then the garnishment must be equal to 30 times the Federal hourly minimum wage, says Nolo.

Wages that cannot be garnished include retirement funds, disability, Social Security payments, unemployment, and worker’s compensation.

Also exempt from judgments are equity in one vehicle up to $5,000 and equity in a house up to $50,000, depending on your state. Check your state exemptions to be sure.

Paying A Collection Attempt

When things reach this pass, it’s a good idea to try to negotiate a payment plan that will fit your budget. After all, you did default on a personal loan because you couldn’t make the payments. Get a notebook and write down all your bills, loan debt, and income. Work out how much you can pay on the consumer loan debt. Even if it’s only $25, most creditors will take it rather than have to deal with the legalities of a default on a personal loan.

Most collections companies and lawyers will try to get you to settle the debt for a fraction of what it was. For example, they may tell you that they’ll settle the debt if you pay half of the original amount. What they do then is selling the other half to another collection agency or lawyer. Then you have to go through it all over again. Add to that the interest the IRS takes in all this, and you have a recipe for fright and frustration. For the sake of not getting a peptic ulcer, try not to settle.

How a Default On a Personal Loan Affects Credit

You wouldn’t have used a lender finder service to check if you could repay a personal loan if you weren’t worried about how the loan would affect your credit. The consequences of default on a personal loan vary from creditor to creditor. As I wrote earlier, a default can mean one missed payment, or it could mean several missed payments in a row.

Missed payments and derogatory remarks from creditors remain on your credit reports for up to ten years. These lower your credit scores and might even adversely affect your search for a job. You may have a more difficult time obtaining any other credit products such as loans or credit cards. Default on a personal loan affects your insurance rates as well as other financial products. They all check your credit reports, so they’ll know if you’ll repay their money.

How You Can Repair the Damage From Default On a Personal Loan

Working with creditors before your account goes to collections is the best way to handle repaying a loan. Their first attempt at collections is within their own company. Only after they fail will the collection be sent to an outside agency or collections lawyer. So your request for a payment plan you can afford should be attempted before the account goes to an outside agency. This payment plan attempt will positively affect your credit.

This can be accomplished in a couple of ways. If the lender won’t work with you, contacting a credit counselor will help. They will work with you to establish a budget within which you can pay your bills as well as the debt you owe and maybe have money left over. In some cases, the credit counselor works with the lender to establish a payment plan. They won’t make the payments for you; you still have to pay the lender. The credit counselor just paves the way for easier relations between you and the lender.

If the collections have reached the point of a lawsuit, then contacting a lawyer is your best bet. The lawyer will work with the court and the lender to establish a repayment plan. The judge will always rule in favor of the lender, but the lawyers will get a payment plan together. Be aware that you will be paying court costs, too, and these will be worked into the payment plan.

Work with Your Lender – Most of the Time They’ll Want to Help

If the debt owed is beyond the state’s statute of limitations, you can’t be legally sued. Collection agencies will still try it in order to get the loan repaid. However, though they can’t legally sue you, you still owe the money. It’s a good idea to negotiate a payment plan rather than let things go this far.

The only way to get out of a lawsuit is to tell the collections agency to prove that you owe the debt. The burden of proof is on he who brings the case. If you didn’t incur the debt, then the judge will dismiss the case. This is only if you didn’t incur the debt.

It pays to keep every piece of paper regarding the loan. To take collections off your credit, you’ll need documentation proving that you’ve paid off the debt in full. If you never owed the debt, you’ll need documentation showing this. Either way, send copies of the “paid in full” statements of the debt to the credit bureaus. Ask that any derogatory comments be taken off your credit reports.

You’ll also need proper documentation if there’s an error on your credit report. This would be the case if you’ve already paid the debt or if an incorrect item was placed on your credit. If collections agencies are still attacking you, lodge a complaint with the Consumer Financial Protection Bureau. Additionally, dispute the items with the Big Three credit bureaus.

Everything About Debt Settlement You Were Afraid To Ask

There are dozens of reasons for applying for a consumer loan

Using a service to help find a lender for seeing if you can afford a loan is good only insofar as you have the wherewithal to repay the loan. If you’re interested in getting a personal loan, maybe Fiona and Loanry can help you with carefully selected reputable lenders.

I’ve written some scenarios in which you might be unable to repay a personal loan. A default on a personal loan is a very serious matter and should be avoided at all costs. Here are examples of the many reasons to use a personal loan:

New Home Business

You took out a loan to pay for a stock for your new home business. You’ve advertised on social media, you’re doing email campaigns, and you’ve wrapped your car with information about the home business. No one has bought anything, though. Your first payment on the loan is coming up, and you don’t have the money to pay it. It’s not your style, but you’re considering default on a personal loan.

Dental Work

You needed dental work done rather desperately. Your insurance at work only paid for half of it, though. You needed a personal loan to pay for the other half. Then the unthinkable happened. You were hospitalized due to the inability to breathe. Mold was found in the house. You missed a week of work for which you won’t be paid. How are you going to pay the first dental loan payment?

Car breaks down

If your car breaks down one more time, you’re going to set it on fire. You’ve been late to work more days than you’ve been there. The boss notices these things. He’s advised you to get another vehicle, so you did. You’re not late to work anymore, but the loan you took out for the down payment on the car is coming due. Maybe the boss will let you work extra to make up the time lost. It’s the only way you can make the payments, so you won’t default on a personal loan for auto repairs.

Home Repair

As you were having work done on the sump in the basement, the workers showed you where your foundation had shifted. Now you understand the cracks in the walls and ceilings upstairs. You know this is going to take some serious money to fix, so you immediately call a consumer loan office after you use their loan checker to see what the payments will be. Then you decide you can pay the fast loan payments, but only if nothing else goes wrong. You won’t be able to pay for it if anything else happens.

It’s been an especially wet summer. While that’s good for the crops and the water table, it hasn’t done much for your house. The basement flooded, causing mold and bacteria to influence the indoor air quality. You’re going to need professionals to get rid of the water, clean the mold, and replace any woodwork and drywall affected by the water. That will wipe out your savings account. With what will you pay the bills? You might have initially used a loan checker service to look into home repair loans.

Emergency Medical

Your daughter was figure skating at the local ice rink. The instructor there told you she could be Olympic material with a little work. Your head in the clouds, you told her to take off her skates, because you had to be somewhere in a few minutes. As she skated toward the bench, she fell. Broken leg. Both you and the instructor were horrified. The doctor set the leg, though she wouldn’t be skating for months while it healed. The insurance paid for the whole thing. However, your daughter messed up her arm in the fall and no one knew it. You’d have to take out a consumer loan to pay for the arm, because the insurance people wouldn’t pay for the arm so close to paying for the broken leg.

Your daughter-in-law is in the hospital for complications following the birth of your grandson. Your son is at his wits’ end trying to work, take care of a newborn baby, and worry about his wife all at the same time. You call your local consumer loan office following using their loan checker. If fast loans are the only way you can get a plane ticket across the country to help, then fast loans it is. Your retirement fund is enough to repay the loan, so you won’t default on a personal loan. You don’t even worry about that, because your son needs help. Right now.

Need money until Payday

Your new job holds back a week on your paycheck. You’re paid every two weeks which means you won’t be paid for a whole month. The bills aren’t going to wait that long, nor will you be able to eat for a month. You’ll need gas in the car to get to work, too. It looks like you’ll be using a loan checker to get a consumer loan or even those fast loans they show in commercials on TV. As long as they’ll work with you on the timing of the first payment, you can pay your bills and eat. It won’t do to default on a personal loan just as you’re beginning a new job.

It’s not easy to watch the company you work for sending most of its work overseas. You understand the premise: it’s cheaper to send the work overseas where they pay their workers pennies per day. Having the finished product shipped back over here is cheaper than paying American workers. You understand it, but you don’t have to agree with it when they give you a pink slip. Thank goodness you work two jobs, or you’d be looking for personal installment loans online or going to one of those fast loan places you’ve heard about. Still, you could use another job just so you won’t have to default on a personal loan.


Generally speaking, people don’t take out a loan with the express purpose of defaulting on it. The default usually follows a financial disaster like the loss of a job or a medical emergency. I wrote about such scenarios at the beginning of this discussion. However, stuff happens. You do have choices, though, leaving you with at least one or two ways of repaying the loan.

If you foresee a situation in which you can’t repay a personal loan, act immediately. Lenders will always work with you to find a way to repay the loan affordably. They don’t want to lose their money, nor do they want to waste time with legal fights. You don’t want to see your credit ruined, nor do you have the time or the extra money for legal fights. So acting immediately is in your best interests.

Your credit is representative of your good name and financial habits. Credit rules our lives and all that we do. Ruining your good credit by defaulting on a loan, however unintentional, has lasting consequences. You want to avoid those consequences at all costs, so you will have an easier time of it in the future. Good luck, and God bless.