How to Compare Personal Loan Offers from Multiple Lenders

Loan contract close-up

You should always take time to compare personal loan offers before borrowing. Borrowing is going to impact your finances. Therefore, it’s essential to be sure that any loan you take out won’t negatively impact you financially. Consumers should be aware that there are many different personal loan providers. All of these providers show differences in the loan products they offer.

Once you’ve decided to borrow, it’s time to start comparing. To successfully compare loan offers, you need to know the aspects of these offers that you should be evaluating. Get started with your research now by learning more about borrowing and comparing personal loans.

Steps to Compare Personal Loan Offers

You now understand the major characteristics of personal loans. This information will help you compare personal loan offers. There are a few steps to go through to compare personal loan offers properly.

Borrowing a personal loan is a big decision. You need to put effort into choosing the best loan offer. You don’t want to commit to a loan that will hurt you financially. The following are six steps you should go through to adequately compare your various personal loan options.

Figure Out What You Need

To get started, determine how much you need to borrow. This is a key consideration. Also, determine how much you can afford to put toward a monthly payment. This will help you set up a budget for your loan. Additionally, it will help you determine how much time you’ll need to pay back your loan. This will be your loan term.

Set Some Goals

Have goals in mind about what you want the terms of your personal loan to be. In particular, have a goal set for the maximum amount you want to spend on your loan. These goals will give you something to work toward in the pursuit of a loan.

Consider your credit history and income. These will give you an idea of what interest rate you can expect. Determine a realistic goal for the interest rate and fees on your loan. Remember that you won’t qualify for the best interest rates with a low credit score.

If you don’t meet your goals, you might want to wait before borrowing. Your credit score might be too low to achieve a loan offer that’s affordable. In this case, setting time aside to bring up your credit score and improve your finances could be a good idea.

Research Your Options

Once you’ve considered your situation and set some goals, you need to explore loan offers. The Internet is a great source of information for comparing offers from different lenders. Check out the interest rates offered by each lender. Also, check out the credit and income requirements. Look for a lender offering both interest rates that allow you to meet your goals and requirements that you can qualify for.

Figure Out the Total Cost of Each Option

When you compare personal loan offers, calculate the total costs of each option. Don’t just consider interest charges. Factor in the added costs of origination fees or any other types of fee. Of course, you want to minimize the total cost of your loan. Yet if you’re looking for a personal loan for bad credit, it may be hard to get a low interest rate.

Consider Other Major Factors

The expense of borrowing isn’t the only factor to base your comparisons on. There are other important factors to look at, like a loan term, repayment options, and customer service.

For one thing, the loan term you’re offered is important. You should have a timeline in mind for when you want your loan paid off. Be aware that some personal loan providers charge early repayment fees. This means you don’t want to borrow a loan with a long loan term assuming you’ll just pay it off early. Lenders charge early repayment fees to make up for the interest lost when a loan is paid off early. Early repayment fees often mean you’ll have to wait out the entire loan term to minimize the expense of a particular loan.

You should consider the convenience of repayment. Look for lenders offering convenient repayment options. Some lenders will allow you to automatically debit payments from your checking account. This will make it more convenient to repay your loan.

Don’t overlook the qualify of customer service offered by a lender. You may need to contact your lender numerous times for service and assistance. Make sure you’ll be able to get a representative on the phone when you need to talk to someone about your loan. Look for a lender with a good reputation in regards to customer service.

Characteristics of a Good Personal Loan

Now that you know what some advantages of personal loans are, you should learn to recognize a good loan provider. Some providers are better than others. Some lenders are known for very high interest rates.  You don’t want to borrow from these lenders if you’re looking for personal loan options for good credit.

When you compare personal loan offers, look out for loan providers who are strong in the following categories.

Customer Service

Don’t underestimate the importance of good customer service when you’re borrowing. You want to borrow from a provider who will be there for you when you have questions. That’s why you should consider customer service when you compare personal loan offers.

Take the time to call your loan provider before you agree to the loan. Consider whether the representative you speak with is helpful and courteous. Make sure that you can get someone on the phone relatively quickly when you need to.

Interest Charges

How much interest the lender charges is a huge consideration. You don’t want to take out a loan with an outrageous interest rate. This will be expensive for you and could damage your finances. It’s important to know that some lenders charge interest rates of 20 percent or higher.

An ideal interest rate for a personal loan would be around 10 percent. Depending on your credit score, you might not be able to qualify for a loan with such a low interest rate. However, you should try to avoid taking out a loan with an interest rate of 25 percent or higher. If this is all you can qualify for, it’s a good idea to take some time to improve your credit before borrowing.

Additional Fees

When it comes to personal loans, interest isn’t the only expense you’re looking at. Some lenders add on additional fees. You should understand these additional fees to compare personal loan offers.

Numerous types of fees are frequently applied to personal loans. For example, some lenders charge an origination fee. An origination fee is generally charged upfront when the loan is initially processed. Some borrowers could charge as much as 8 percent of the total loan amount as an origination fee.

There are also penalty fees added on for almost any personal loan. You will probably be charged a fee for making a late payment. While you obviously will try to avoid late payments, you might end up making a late payment at some point. It’s, therefore, a good idea to be aware of what the late payment fee is. Try to avoid personal loans with very high late payment fees.

Applicant Requirements

When you’re comparing possible loans, you need to find a provider who can work with borrowers with your credit score range. You don’t want to apply with a lender with requirements that you can’t meet.

Remember that credit inquiries can negatively impact your credit score. Be especially careful if you’re dealing with poor credit. You don’t want to apply with a lender who will likely not approve of you. If this happens, you’ll have an unproductive credit inquiry on your report. Also, being denied a loan can detract from your credit score even more than a simple inquiry.

Only apply with a lender if there is a very good chance that you will be approved.

Loan Amounts

When you decide to borrow, you should have an idea of how much money you need. Then, you can look for lenders offering loan amounts for around the amount you need. Ideally, you should borrow from a lender that is flexible regarding loan amounts.

Repayment Options

Another factor to evaluate when comparing lenders is repayment options. You should work out a budget before you borrow. You need to make sure that you’ll be able to keep up with loan payments.

Discuss repayment options with lenders before borrowing. Ask how much time you’ll have to repay your loan. You also might want to ask about features like grace periods that mean you won’t be reported to credit bureaus if your payment is only a few days late.

Your goal when borrowing is to improve your credit with the loan rather than hurt it. Therefore, evaluate repayment options and make sure they are flexible enough for you to avoid credit damage.

Lenders to Consider

Below, we’ve compiled some possibilities on different companies offering personal loans to consider. You should look into these lenders when you compare personal loan offers. These lenders might offer the ideal personal loan product for your unique needs. However, you need to do your research to find out. All these lenders provide a good deal of information for prospective borrowers on their websites.

Avant

Avent LoansYou may want to check out personal loans offered by Avant if your credit score is low. This provider lends to consumers with credit scores as low as 580. In addition to having a low credit score requirement, Avant also has a relatively low income requirement. You could borrow as much as $35,000 from Avant if you qualify.

OneMain Financial

OneMain Financial does not have especially strict credit score requirements. However, your score may need to be slightly higher for approval from OneMain than from Avant. On average, those approved for OneMain loans have credit scores of around 600. You can borrow as little as $1,000 or as much as $20,000 through this lender. However, your credit score will probably need to be fairly high to be approved for a larger loan from OneMain.

Rocket Loans

Rocket Loans logoYou should be aware of Rocket Loans when you compare personal loan offers. Rocket Loans allows you to apply online. You can pre-qualify on their website. This means that you can see the details of what Rocket Loans can offer you without any damage to your credit.

Rocket Loans is flexible when it comes to repayment. You can take advantage of early repayment through Rocket Loans without any penalties. However, one disadvantage of working with Rocket Loans is that you will have to pay an origination fee for the loan.

Upstart

Upstart LoansIf you want to apply with Upstart, you should have a credit score of at least 580. However, you’ll get the best rates if your credit score is higher. Upstart has an income requirement, but it is fairly low. You only need to earn $12,000 to meet income requirements. You can borrow as much as $50,000 from Upstart, but interest rates can be as high as 35.99 percent. In terms of repayment, you’ll have between three and five years to pay off a loan from Upstart.

Lending Club

Lendingclub loansLending Club could be the right option if you’re looking for an unsecured loan. When you apply through their website, you’ll be considered for several different loan possibilities. If your credit is very strong, you could enjoy an interest rate as low as 6.95 percent when you borrow through Lending Club.

Discover Personal Loans

Discover logoIf you have pretty strong credit, you may be able to qualify for a personal loan from Discover Personal Loans. There are numerous advantages to borrowing from Discover. You won’t have to pay an origination fee for loans from this provider. Also, you can enjoy an interest rate of as little as 6.99 percent.

It’s very convenient to apply for Discover Personal Loans. You can apply online. You’ll know within only a few minutes whether you’re approved. Those who use a personal loan for Discover for debt consolidation can have their loan funds conveniently sent directly to creditors.

Resources in Finding the Right Loan

You’ll need to search for information when you compare personal loan offers. To do this, you need to take advantage of the information sources available to you. There are numerous resources you can use to find the right loan. You want to make sure that you leverage all of them. Leveraging these resources allows you to make an informed decision when you borrow. Below are three key resources to take advantage of to thoroughly research and compare personal loan offers.

Word of Mouth

Don’t forget to ask around about loan offers. Colleagues, friends, and family members might have good advice. Talk to someone you trust about borrowing. Word of mouth is probably the best way to find information. When you find out about a good lender from someone you trust, you know you’re getting first-hand information. You’re not simply getting biased advertising from the lender in question. You’re speaking with an actual satisfied customer.

The Internet

The Internet has become a fantastic source of information on just about anything. This includes personal loans. Every personal loan provider out there should be on the Internet by now. You can compare personal loan offers by visiting the websites of prominent lenders.

Analyze all the key factors mentioned above when using the Internet to research loan offers. Lenders should post all the key details online like loan amounts, interest rates, credit score requirements, and more. In fact, many lenders nowadays have a website feature that allows you to get a loan estimate without a hard credit inquiry. This is a great way to compare the various possibilities available.

Financial Counselors

Perhaps you have a financial counselor available to you. This could be an individual you can speak with through your bank or the human resources office of your employer. It also could be your accountant. If you have a financial counselor, use them for assistance when you compare personal loan offers. Ask them about trusted lenders they can recommend.

Your financial advisor probably knows a good deal about your financial situation. They therefore might be able to tell you which lenders are likely to approve you.

Final Thoughts

You’ve now learned about how to compare personal loan offers. You also have some ideas on lenders you should consider. Now you need to consider your unique financial situation. Then, figure out which lender offers the best product for you. You shouldn’t be overlooking any good offers you could qualify for. It’s important to consider every possibility.

Loans can be great financial tools for consumers if used properly. Don’t hesitate to take advantage of the right loan offer now. By focusing on your budget and finances, you’ll be in good shape when you pay off your loan. Also, a loan on your credit report that’s paid off promptly will boost your score.

Choose wisely between loan offers. You’ll soon have a good deal on the loan funds you need to reach your financial goals.

Personal Loans From Banks Can Be A Secure Move

There are plenty of reasons to consider getting a personal loan. Some common ones include getting a personal loan for credit card debt, getting a personal loan for home improvements, and getting a personal loan for a vacation or other special event. These are not the only reasons, of course, as personal loans can be used for basically anything.

Making the decision to get a personal loan is big enough. Such a decision can affect your life in many ways, both positively and negatively. If you are going to go through with the decision, you want to be sure that you are making a wise decision about where you get the loan. Once upon a time, choices were limited as there were only so many financial institutions that loaned money. Today, however, there are tons of places in each city and online. With so many options, how do you choose the right lender?

The answer is simple. You do your research. When it comes to borrowing money, what worked for your mom or your best friend may not work for you. You need to find a lender that suits your financial situation and your needs, and that will be different for everyone. Some people will find that a bank is their best option while others might find an online organization dedicated to the loan is best for them.

We are going to kick start your research here with this guide on personal loans from banks, their pros and cons, and the basic types of personal loans you can get from banks. Let’s jump right in.

Personal Loans From Banks

Personal loans from banks work similarly to loans from other places. You put in the application, provide the necessary documentation, and probably have an in-person interview with the loan officer. Afterward, the loan officer will consider your personal information and decide whether or not you fit the bank’s criteria. They will then pass that decision onto you.

Some people steer clear of getting loans from banks. This is usually because they have heard how difficult it can be to get approved. Other people only think of traditional banks when they consider getting a loan because that is the way their family or friends did it. Either way, there are both advantages and disadvantages to getting personal loans from banks.

Advantages of Personal Loans From Banks

Reputation

One great thing about personal loans from banks is that the banks tend to have a reputation to stand on. Chances are that someone you know has had dealings with the banks in your area. Your grandparents probably banked with some of them, your parents with others, and friends with others. This makes them feel more trustworthy to you.

Additionally, most of them have a history you can research. The same cannot always be said about other lending institutions, so borrowers often feel more secure getting personal loans from banks. This does not necessarily make them better- just a more comfortable option.

Relationships

Sometimes, though not always, the relationship you have with your bank might give you a leg up. For instance, some banks, especially credit unions, might approve their bankers for loans even if the banker does not quite meet the requirements. Or the banker might receive special rates because of their loyalty. Again, this is not always the case, but some banks and credit unions do make every effort to help their members.

Interest

Banks usually have lower interest rates for personal loans than many other financial institutions. This is actually one of the best reasons to go to a bank for financial needs. Personal loans from banks can provide some of the best terms and rates.

Disadvantages of Personal Loans From Banks

Difficult to Obtain

Most banks have really stringent requirements when it comes to approving loans, especially in the credit scoreBank vs online lender department. Banks are very picky about who they loan money to. If you do not check off all the boxes on their list, you will likely not be approved.

As I stated previously, some banks are a bit more flexible when it comes to helping their members. This is more so with credit unions and smaller banks- ones that serve specific areas as opposed to being part of a chain. Most large, franchised banks are not flexible in their requirements. If you do not meet their requirements, you are simply out of luck.

May Require Collateral

Some banks do not provide unsecured loans at all. Others provide them, but only to those with stellar credit. For everyone else, you must provide some form of collateral. We will get a little deeper into secured and unsecured personal loans from banks in a minute. The point, though, is if you do not have something that can be used as collateral or really excellent credit, a bank may not be the best avenue for you.

Fewer Options

Banks either have their own financial products or work with one lender, limiting the options available to you. If you do not fit the requirements for that one lender, you might as well walk away.

Most other lending institutions work with several lenders, offering their borrowers a wide variety of products. With these institutions, if you do not fit the requirements for one product, you still have a shot. They can usually find a product to fit your situation instead of trying to fit your situation into a product.

Longer Wait

Personal loans from banks can take a much longer timeline than other institutions. Some online lenders say that they can get you approved and get the money into your account in a day or less. Banks tend to take days, sometimes weeks, to make loan decisions and process the payout. If you need the money quickly, personal loans from banks is not the best choice.

Fees

Fees are another downside of personal loans from banks. The type of fees they charge vary according to the bank, but do not be surprised to see origination fees or even prepayment fees. While some other institutions may charge these same fees, they are much more common with banks.

On the positive, these fees, except for late fees or prepayment fees, are often calculated into the loan, so you are paying for them as you make your loan payments instead of having to pay them upfront. However, this causes another issue. Let’s say you need $1,000 and the bank approves you for that. They also charge you a $100 origination fee, which is calculated into the loan. Though you were approved for the full amount, you will actually only receive $900.

This might not be a problem for everyone, but if you need the full $1,000 for something, it could affect you. If you choose to get a loan from a bank, or any other lender, be sure you understand what fees are added at what point. That way, you can ask for enough money to cover the fee and what you originally needed the money for.

Secured Personal Loans From Banks

Secured loans are those that are attached to some form of collateral. This collateral might be:

  • A home
  • A piece of property
  • A vehicle
  • A savings or investment account
  • Electronics
  • Jewelry

Collateral can be anything that is valuable that you own. It is up to each individual lender what types of collateral they accept.

Advantages of Secured Loans

Lower Interest

Since your loan is attached to collateral, the lender is assuming less risk. If you default on the loan, he or she can take possession of that collateral and recoup some of the losses. As there is less risk, the interest rates are usually lower than those on an unsecured loan.

Higher Approval Odds

Providing collateral makes it much more likely for someone to get a personal loan for bad credit. Even if that person has lower credit, the lender is still assuming less risk, so they are more likely to consider lower credit scores for your personal loan.

Higher Loan Amounts

Secured loans also usually come in larger amounts than unsecured loans. While this is an advantage in most cases, it can also be a disadvantage. Higher loan amounts come with higher fees and more overall interest. It is important to factor that into your decision.

Disadvantages of Secured Loans

Risky for the Borrower

No one plans to default on a loan. When a borrower takes out money, they do so with the belief that they will be able to pay it back. It seems safe to put up collateral because they plan to get it back.

What happens when life happens, though? Sure, you had every intention of repaying that loan, but that was before you got laid off, before your kids got sick, before someone without insurance rammed into your vehicle, or before the pipes burst in your bathroom.

The truth is that we never know what is going to happen, which is why using collateral for a loan is so risky for the borrower. Let’s say you used your only car as collateral, and due to no fault of your own, you find that you cannot make your loan payments. What will you do if the bank comes to take possession of that car? How will you get to work or get your kids to school?

I’m not saying that you should steer clear of secured loans completely as that may not be an option. I am trying to get you to think it through a bit more and do so with care. Have a backup plan just in case the worst happens.

Unsecured Personal Loans From Banks

This category of loans is another type of personal loan from banks. Unsecured means that there is no collateral attached to the loan. You are borrowing on your agreement to repay. There are pros and cons to unsecured loans, too.

Advantages of Unsecured Loans

  • Less risky. As there is no collateral connected to the loan, an unsecured loan is less risky for the borrower. Yes, there are still issues if you default on the loan. However, you are not signing over the rights to your home or car.
  • Faster approval times. Secured loans often take longer to be approved because the collateral has to be appraised. There is no appraisal process with an unsecured loan, though, so they can be approved much faster.

Disadvantages of Unsecured Loans

  • Lower loan amounts. As the lender has no guarantees in the form of collateral, unsecured loans tend to come in lower amounts. This is one way that the lender minimizes their risk- if you do default on the loan, it is a smaller amount.
  • Higher interest. Since an unsecured loan is so much riskier for the lender, they come with higher interest rates. This means you will either be paying more each month or you will be paying for a longer period of time. Either way, unsecured loans cost the borrower more.
  • Lower approval odds. Unsecured loans are based off of your credit-worthiness. This makes it very difficult for many people to get approved for them.

Tips for Getting Personal Loans from Banks

Consider the loan carefully

Here’s the thing: No matter why you need the loan, it is still debt. If you are struggling to pay your current bills, adding on a new one is not a wise move. I understand that sometimes you have to make choices that are not the best. But be sure you think it through carefully. With a little time, you may be able to find another solution.

Check your credit before applying

You do not want to be surprised when you get there. Imagine thinking that you have a credit score over a 680 but the bank telling you that you are about 30 points off. When you take a look later, you realize that a collections account was added to your credit report in the last couple of days that you were not even aware of. It is always best to check your score right before applying.

Research the specific institution’s requirements

Check credit score requirements for your personal loan. If they require a 720 credit score but you only have a 650, you can save yourself time by moving onto the next option.

Apply for all personal loans within two weeks

Every time you apply for credit, your credit score is affected. However, if you apply for credit in the same industry within a two week period, you should only get that hit once instead of for every application.

Be prepared

Getting approved and getting the money is already going to take some time. Don’t add to it by not being prepared. Take all personal identification and financial documents with you to the interview. Otherwise, your application may be put on hold until you return with it. The more prepared you are, the quicker you should get results.

Be smart about collateral

If you have to put up collateral to get approved, be smart about it. Try to use something that would hurt the least if you were to lose it. For instance, let’s say you have two cars: One for you to get to work that is too small for your whole family and one for the whole family to get around. While losing either would be terrible, it would be worse to lose the vehicle that can get everyone where they need to go.

Budget

Anytime you take out debt or add on a new bill, you need to revisit your budget– assuming you already have one. If you do not, creating one should be a priority. As soon as you add this new expense to your life, you need to add it to your budget. Do not wait until the week the loan is due to figure out how to pay it. Decide immediately how exactly you will cover it. You might need to cut something else out of the budget for a while, cut back on some things, or pick up a second job. Whatever you need to do, make the plans now.

Conclusion

For many people, getting a loan from a bank is a wise move. For others, it may not be. Whether it is the right move for you can only be decided after you consider your financial situation and how personal loans from banks can affect your life. Do not rush the decision if you can help it. Take the time to consider it fully before making a move.

Remember, you can always try with an online lender if the banks are not the best option for you. We partnered up with Fiona to be able to connect you with the best lenders for your situation.

What are the Different Types of Personal Loans?

If you are in a position where you are considering a personal loan, you probably have a lot of concerns. Being in a position to need a personal loan often brings about stress. It usually means that you need cash right away for some bills you cannot afford to pay. You may have some unexpected repair bill or medical procedures that bring about their own stress. On top of that, you do not have the money to pay for it. There is some good news for you. There are many options available to you. Many of which you may not be aware of. I will walk through all of your options including the many types of personal loans in this article.

What Is A Personal Loan?

If you are considering a personal loan, it is important that you fully understand a personal loan. It is important that you have a full working knowledge of personal loans so that you can make the best decision for your needs. The most basic description of a personal loan is when someone allows you to borrow a set amount of money. You agree to repay the money by making regular monthly payments. Typically, the lender is a bank, but it can be a credit union, online lender, and even family and friends. The lender charges you a fee to let you borrow the money. The fee is called interest. Your credit rate dictates your interest rate. The higher the interest rate means the more you pay per month to repay the loan.

There are many different types of personal loans. It is helpful for you to go personal loan shopping when considering a loan. This gives you information about all the loans that are available and helps you make the right choice. With so many lending options available to you, you do not have to take just any loan. You can and should make sure you have the right loan for you. If you have less than perfect credit, you may have less options.

However, there are still options available to you. It is important that you understand all of your options when it comes to a personal loan. You also need to make sure that you can afford to repay the loan. When you do not pay the loan back on time, it impacts your credit and potentially causes late fees which just adds to the amount you are already paying. You should take all of this into consideration when thinking about a personal loan.

Different Loan Types Explained

One aspect of personal loans that can be really confusing are all the types the lenders offer. When you are in a rush to find the money for financing anything in your life, you should probably stop for a second and think about this. Depending on which type of personal loan you choose, you will be faced with different conditions and obligations. So here is everything explained in detail.

Loan Types #1 – Traditional Loans

I mentioned that there are many different types of personal loans available to you. I want to highlight some of them for you. This way you can understand what is similar and what is different about all of them. This help you make the right decision. There is no such thing as having too much information. First, let us take a look at traditional lenders. When I talk about traditional lenders, I mean the banks that you know well. You may not love them, but I know you know them. They are the buildings that are brick and mortar. They are the banks that you can still walk into and there are tellers and loan officers to help you. Many of them do have online banking options, so you do not have to go into the bank. Many of these banks started out as neighborhood banks but have changed with the times and now offer more services online.

If you go into these banks to obtain a loan, someone is there to help you. Most likely, they will fill out the paperwork for you. These banks prefer to lend to those who have good credit. They are not the best at lending to those who have less than perfect credit. If they do lend to someone with bad credit, the interest rates are really high. They also may take a little longer to process your application and get the money to you, if approved. If you are approved for a loan with them, most likely they want you to open up a bank account with them, if you do not already have one.

Loan Types #2 – Online Lenders

Online lenders offer some of the other types of personal loans. There was a time when online lenders were for those with bad credit. They used to only offer loans with high interest rates. That is no longer the case. Online lenders are transforming the world of borrowing money. Now you can apply for a loan online in minutes. You are able to upload any documents directly from your computer to your application. It literally takes minutes to apply and submit all documentation. You receive a response in less than 24 hours. The money is in your bank account in about 24 hours from your approval. All of this happens in about two days. That is why many people are interested in an online lender.

For those with good or better credit, you can find online loans that offer you low interest rates. It is incredibly easy to research a personal loan online. With so much information available online, you can easily find all the information you need to make the best decisions about the right loan for you. The major downside to online lenders is being aware of which lenders you can trust. In our world of internet fraud and identity theft, you cannot be too careful. Do your research and find out what you can about any online lender in which you are interested. The information is available to you, you just have to look. This is not the time to get lazy. A quick search can give you tons of information about a lender. Be sure you know the lender is legitimate before you press submit.

If you’re interested in getting a personal loan online, you came to the right place. Fiona and Loanry bring you carefully selected reputable lenders.

Loan Types #3 – Fast Cash Loans

I know I probably sound like a broken record but there are many types of personal loans available to you. You should keep in mind, just because you can borrow money, does not mean you should. Just because you can borrow money from a certain lender does not mean you should do that, either. There are some loans with which you want to proceed with caution. Fast cash loans are those loans. They may come in the form of payday loans or title loans. Either way, they can be dangerous.

A title loan is when you use the title of your vehicle as collateral. These lenders do not typically check your credit. That may make them seem like a good idea for those with bad credit. However, they usually have high fees and interest rates. Also, keep in mind, you give them the title to your vehicle to hold until you repay them. Usually, you have to repay within a short period of time. The lender determines the value of your vehicle and does not allow you to borrow more than a certain percentage of that value. Just in case you missed it earlier, if you do not repay this loan, the lender can take your vehicle because you offered it as collateral.

Payday loans are another type of loan that gets you cash fast but move forward with caution. These loans are for small amounts and they have a ridiculously high interest rate. You must repay this loan on your next payday, hence the name. You give the lender a postdated check for the full amount of the loan. Yes, that is correct, you must pay back the loan in full on your next payday. The lender requires proof of your income so he can see how much money you earn with each paycheck. Also, the lender does not allow you to borrow more than your paycheck amount. The lender receives authorization from you to access the money in your account so they can receive their payment.

Loan Types #4 – Secured Loans

One of the other types of personal loans is a secured loan. A secured loan is often a mortgage or an automobile loan because they come with their own collateral built into the loan. However, there are some personal loans that are secured. That means that they have collateral attached to the loan. This is usually something expensive, that is worth more than the total loan amount. It can be a house, or car, or even jewelry or an expensive collectible. If the lender can prove the value of it, they may accept it as collateral.

Once you have offered something as collateral for a loan that means that if you default on, or do not pay, the loan, the lender can take your collateral in place of repayment for the loan. In the case of it being a house, the house is foreclosed on and you are kicked out of your house. If it is a car, the vehicle is repossessed. In short, you do not want to lose whatever it is that you used for collateral. Since these loans are secured with an item, the lender usually lets you borrow a higher amount of money than with an unsecured loan. These types of loans also have a lower interest rate because the lender feels more secure about them.

Another way you may be able to secure a loan is to have a cosigner. You may not be approved for the loan on your own, but if someone with good credit is your cosigner, the lender may agree. The cosigner is promising that you will repay the loan in full and on time. If you do not pay back the loan, the cosigner is responsible for your loan and must pay it. If the cosigner does not pay your loan, it will negatively impact his or her credit.

Loan Types #5 – Various Types Of Interest

When it comes to understanding the different types of personal loans, you should also understand the different types of interest. For personal loans, there are really two types of interest. There is fixed interest and variable interest. Fixed interest is just that, fixed. Whatever the interest amount is when you sign the loan papers, it is for the life of the loan. This means that your payments are the same each month and do not change. You always know how much you owe and there are not any surprises. The downside to a fixed interest is the interest amount is usually higher. Most people feel as though this is a price worth paying for the security of a fixed interest amount.

The other type of interest is a variable rate. This is different from the fixed rate because it changes. This rate is closely tied to the prime rate. All interest rates are based on the prime rate. Lenders use the prime rate as their base and then add however many percentage points they would like. With a fixed interest, you lock in when you sign on the dotted line. With a variable rate, you never lock in, unless the lender gives you a chance to at a later date. That usually does not happen with personal loans. That is more likely on a mortgage, but let us continue to focus on personal loans.

When the prime rate changes, so does your interest rate. Often the lender has a limit on how much it can fluctuate and how often. Even with those parameters in place, your loan payment changes. It may change in your favor and go down. But, it always goes back up again. These rates may be a little lower to start, but think carefully before pursuing this option.

Why Does My Credit Matter?

I know you do not want to hear it but your credit matters for most types of personal loans. What you really need to know about credit is this…a typical credit score is anywhere from 350 to 850. Most people have a credit score between 600 to 750. Good credit falls between 670 to 800. Anything below 570 is the danger zone of bad credit. When you have bad credit, it is much harder to get a good interest rate. You may find it is difficult to be approved for a loan, if you have bad credit. It is still possible to get a loan, but you have to work harder and do more research.

It takes a long time to build up your credit and only one or two missed payments to send it plummeting. Yes, that is correct. The number one cause of bad credit is late or missed payments. Creditors do not care why your payments were late. They only care that they were late. The number on your credit record does not tell the story. It does not give a full picture of you. Lenders pull your entire credit record to try to put together the pieces. They are not always successful. Sometimes, a lender wants to know your story and why you had moments of missed payments. Some of them listen to your reasons and consider them in determining if they should allow you to borrow money.

What Do I Do If I Have Bad Credit?

If you think you have bad credit, you should find out for sure. You need to pull your credit report and look at it. You cannot do anything to correct it until you know what it says. If you see any errors, you should correct them immediately. This can help improve your credit score. Once you have done that, you need to work on improving your credit score in other ways.

First, you should decrease your debt to income ratio. That means you need to start paying down your debt. You should work hard to decrease it as much as possible. You also need to make sure you make all of your payments on time and in the amount that is due. Even if you can only make the minimum payment at first, pay only that amount. It is more important to pay the minimum on time than to pay more late.

There are all types of personal loans, even a personal loan for bad credit. Your options may not be as plentiful as those who have great credit, but you still have options. You have to do some more legwork to find loans when you have bad credit. You have to do the research to determine who can offer you the best loan terms. Remember, just because a lender offers you a loan does not mean you should take it.

Why Should I Create A Budget?

Creating a budget is one of the smartest things you can do. If you are considering any of the types of personal loans, you should first make sure you can afford to repay the loan. There are many tools available online to help you create a budget for yourself. Most people do not like to even think about budgeting. They think it is some barbaric form of control. Well, I prefer to look at it as you taking control of your finances. It is you stepping into the driver seat and applying gas. You gain an understanding of how much money you earn and how much you spend. You see the items on which you spend money each money. It is in front of your face in black and white. You cannot argue with the numbers.

I am willing to bet you spend more money per month than you realize. I am also willing to bet that you are going to be shocked when you see exactly on what you spend money. You should not even consider a loan until you know you can afford one. The simplest way to do this is gather all receipts and information about where you are spending money. Write it all down and add it up. Then, you subtract that amount from how much money you bring home. Hopefully, that number is a positive number and you can see how much you can afford to repay in a loan. If that number is negative, you already have a problem and should no longer consider a loan.

How Do I Save Money?

So, let us say that number is negative. Now what? Well, first let us not consider any of the types of personal loans at the moment. We can put that to the side. Take a look at the items on which you spend money. Where you can make cuts? The first place to look is that gym membership that you do not use. If you have one and you do not go, you are not going to start going now. Cancel it. If you have any subscriptions that you are not using, cancel them immediately. You could save yourself a hundred dollars right there. That was easy, right? Let us keep going. It gets a little harder.

Now look at how often you eat out and cut that in half right away. If you can, cut it down to two times per week. That includes breakfast, lunch, dinner, and coffee. Yes, I said. Make your coffee at home and save a ton of money. Start preparing your own food. It is amazing how much money you can save. That is probably hundreds right there. Next look at how much money you are spending on groceries.

Start making a list before you go to the store and stick to it. Make sure you are purchasing sale items. Maybe you need to switch to a less expensive store. You can save a tremendous amount of money this way. Look at your cable and phone bill, can you make any changes there to decrease the amount of money you are spending? Call them and see what can of deal they can offer. You never know unless you ask. You should do that with all your regular bills and see how much you can save.

How Do I Know If A Personal Loan Is For Me?

It is possible that once you create a budget and begin cutting costs, you determine that you are saving so much money that you do not need a loan. However, that may not be the case for you. Even after all the cost savings, you still have high credit card bills or some other unexpected cost that you just cannot afford right now. Before you look at the different types of personal loans, look at the budget you created earlier. Now that you have all these savings, add up your expenses again. Now, subtract them from how much you make. Hopefully, now you have a positive number. This number shows you how much you can afford to repay per month in a loan. You should not get a loan that requires you to repay more than that amount because you cannot afford it. If you cannot afford to repay the loan, your credit score suffers. You also bring a lot more stress to your life.

Are There Alternatives To Personal Loans?

There are other options besides all the various types of personal loans. Many of these options are not going to get you cash fast. You can get a part time job. This allows you to bring in extra money and you possibly will not need a loan. You can ask a family member or friend if you can borrow money from them. This is not a hit to your credit and most of the time, you do not have to pay interest. You can work hard and cutting costs in your budget and really make some changes that gives you a lot more money each month. While there are other options to obtaining one of the types of personal loans, they may not be the best options for you at this time.

Conclusion

It always comes down to you deciding what is right for you in this moment. If you already know that you cannot afford any of the types of personal loans, do not get a personal loan. If you know how much money you can afford to repay, then you can consider one of the types of personal loans. You have to do what is in your best interest. No one else can make that decision for you. You have to be in control of this decision. You are the one that is going to make the loan payments, so why would you let someone else decide for you? Do not put yourself in a worse financial position. Make the best decision you can with all of the information available.

How Can A Personal Loan Help My Credit?

Usually, when someone is searching for a personal loan to alleviate their financial troubles, they are concerned with how this will affect their credit. Often times, people imagine that getting any type of loan will be bad for their credit. This is not necessarily the case. If you use a personal loan responsibly and pay it off on time, then getting a personal loan can actually improve your credit. If you are asking yourself, “Is it really possible for a personal loan to help credit?” then read on.

How can a Personal Loan Help Credit Score

Whether or not you have a good or bad credit score can have an effect on your chances of getting a personal loan, but getting a personal loan can also have an effect on your credit score. This effect can be positive or negative, all depending on you and your actions. Below are some ways in which you can use a personal loan to improve your credit score:

Building a Credit History

It is hard to improve your credit score when you have no credit at all. It can feel like a vicious cycle, trying to apply for a credit card without any past credit. You get denied because you have no past credit. But then you cannot improve your credit by using a credit card and paying it off on time every month. Luckily a personal loan can be a good credit starter. By taking out a personal loan that you can repay monthly, you are showing lenders that you can have a positive relationship with credit.

Repaying the Loan on Time

By taking out a personal loan and then repaying it with reasonable monthly payments, you can prove that you are credit-worthy. Repaying your loan on time is essential to this strategy. By repaying the loan, including interest, on time, you can prove to creditors and lenders that you are credit-worthy. This can increase your credit score, as well as better your chances of getting the loans you need in the future, with much better interest rates.

Pay off a Credit Card

Getting a personal loan to pay off a credit card can help improve your credit score. Using a credit card can in itself help improve your credit score. Having credit cards and using them regularly can help you build credit. When you make purchases and then pay them off, you can end up with lower interest rates and a better credit score. If you cannot pay off the entirety of your credit cards alone, then a personal loan can assist you in spending more (and covering the expenses) while you continue to build credit at the same time.

Consolidate Your Debt

A personal loan can help you consolidate your debt, which improves your credit score for many reasons. One way debt consolidation loans increase your credit score is by allowing you to get rid of your debt faster. By decreasing your debt at a quicker rate, you will have less debt to show on your credit report. Besides having less debt, the type of debt for a personal loan does not affect your credit score as much as the debt on a credit card does. A personal loan is an installment loan. So your credit score will be less affected and you will have more access to available credit. In addition to this, the creation of a more varied mix of credit types will increase your credit score.

What Is a Personal Loan?

A personal loan can be a great option for getting cash quickly. No matter what your current financial status is, you may find yourself in a bind due to unexpected circumstances. Whether you need an emergency medical procedure done or need to relocate for a new job, a personal loan may be the right choice for you.

It’s important that you go to the right lender when taking out a personal loan. Our advice is to consider the following lenders brought to you by Fiona, our trusted partner.

Once you have decided that you definitely want to get a personal loan to help credit it is important to understand what your options are. There are many types of personal loans to choose from:

Unsecured Loan

An unsecured loan is a type of personal loan that does not have a call for collateral. Because there is no collateral used to back up the loan, an unsecured loan tends to be riskier for lenders to give out. While this type of loan can be fast and easy to get, the interest rates and fees tend to be higher.

For instance, Joan has a couple of credit cards that she was offered through the mail. On one of these credit cards, Joan spent $2,000 on various purchases. These credit cards are examples of unsecured loans, since there is no collateral used to back up the loan. If Joan does not repay the credit card company for the $2,000 of purchases, then they cannot automatically take her home or car to make up for their loss. If Joan does not pay this money back, then her case can be sent to a collection agency.

Secured Loan

A secured loan is a type of personal loan that does have a call for collateral. Collateral is some type of asset that can be used by the lender to recover the money that was lent, in case the borrower does not pay it back. Collateral is oftentimes a car or a home. The process of getting a secured loan is lengthier than the process of getting an unsecured loan, but the terms tend to be more favorable. One type of secured loan, a home equity line of credit (HELOC), is like a second mortgage, where your home is put up as collateral.

For example, Michael bought his car when he had a great job. He had worked for the same company for several years and had just been promoted. He felt like he could rely on his position at his company to last for several more years. Because of his comfortable financial situation, Michael bought the best car on the lot. He chose the biggest car, with all the new features. He loved his new car and always showed it off to his friends. Unfortunately, due to budget cuts, Michael lost his job a few months after his big car purchase. He tried to renegotiate the monthly payment of his new car, but he was unsuccessful. Because Michael could no longer make the monthly payments, his nice, new car was taken back as collateral.

Open-End Credit

Open-end credit refers to a credit option where you can “withdraw money as you need it, over an extended period of time.” This can be beneficial if you need to continuously withdraw small sums of money for individual expenses. In most cases, you will not even have to pay interest rates on the money that was not withdrawn from the account. Open-end credit can be done through lines of credit and credit cards.

For instance, Ross just got his first credit card. Ross is excited to have his first credit card, as he is also starting college next week and finally feels like an adult, now that he even has his own line of credit. Ross is also excited that he has a credit card with no preset spending limits, so he can buy what he wants when he wants it.

During his first month at school, Ross buys a new telescope, new flat-screen TV for his dorm room, the newest gaming system, and tickets to a Taylor Swift concert. Ross was living it up until he realized that he actually does have to pay all of this money back to the credit card company. There was no collateral to back up the lender’s money, so they had to send Ross’s case to a collection agency. Instead of enjoying the Taylor Swift concert with his girlfriend, Ross had to work double shifts at the planetarium to pay off his debt.

Closed-End Credit

Closed-end credit refers to a credit option where you are given a set lump sum. This is an example of the traditional idea of loans. You borrow a set amount of money that you must pay back, including interest, over a set period of time. This can be beneficial if you need a large amount of money at once. If you get a single payment loan, then you will have to repay the full amount you borrowed, plus interest, in one sum. Closed-end credit can be done through appliance loans or consumer installment loans.

Imagine, Billy has always gone to the lake with his family for summer vacation ever since he can remember. Now that Billy is starting a family of his own, Billy wants to continue this tradition of taking his wife and kids to the lake for summer vacation. Since Billy and his family loves to water ski, he decides it would be a good investment to buy a boat.

He would save more in the long-run by buying his own boat than by renting a boat every summer. Billy doesn’t have enough money on-hand to pay for a boat though. So he finds the boat he wants and then searches for a boat loan to cover the immediate expenses. With the large lump sum he gets from the closed-end credit boat loan, Billy is able to afford the boat his family wants.

Bill Consolidation Loan

A bill consolidation loan is a type of loan which allows you to consolidate all of your debts into one loan that you can repay at once. This type of loan helps you pay your debts sooner, thus saving money in the long run. It is also easier for you to keep track of, since it is only one monthly payment instead of several different monthly payments. On the other hand, if your credit score is not very good, you may end up being stuck with high-interest rates.

For example, Kristi is excited about her future. She just graduated with her undergraduate degree in business and finance, and she has already been offered a job at a large consulting firm in Chicago. Kristi knows that she has a bright future ahead of her, as well as a larger-than-average starting salary. The only problem is that after her six-month grace period, Kristi will start having to pay back her student loans.

Kristi has enough money with her new salary to pay off the student loans every month, but she has trouble with all of the adult stuff she has to take care of and keep track of. She has to get her own health insurance, pay rent on her apartment, and find a cable company to take care of her Internet and TV connection. For Kristi, it makes sense to consolidate her student loans into one loan, so that she only has to pay one monthly payment. She finds out that with her consolidated loan, she even gets to pay a lower interest rate on her loan(s) now.

Reasons to Get a Personal Loan

There are many reasons why you may need to get a personal loan. Some reasons can be more positive, such as for a wedding or vacation, while some reasons can be more negative, such as for an emergency medical procedure or funeral expenses. Remember that you can also be thinking that “I can get a pesonal loan can help my credit.” Below are some reasons why you may consider getting a personal loan:

Vacation

Sometimes you need a break from work, school, and your regular life. When you need such a break, a “staycation,” or stay-at-home-vacation, may not cut it. Just because you do not have enough cash on-hand does not mean that you should have to forego the vacation of your dreams. If you want to treat yourself, the way you deserve to be treated, then a personal loan for a vacation may benefit you.

Medical Bills

Medical expenses can be debilitating. It does not matter if you are currently financially comfortable. An accident can occur at any time, and medical expenses are on the rise. According to a recent report published by the Kaiser Family Foundation, over the last five years, health costs rose 18% for those with employer-sponsored health plans. This outpaced increases of inflation and wage. If you are burdened with medical bills that you simply cannot afford, then you may consider getting a personal medical loan.

Wedding

Your wedding is supposed to be one of the best, if not the best, day of your entire life. Weddings tend to cost a lot of money, with no expense spared. There is nothing wrong with wanting to be extravagant on your special day. But it may not be practical to pay for everything yourself up-front. Not everyone has the cash for a wedding budget on-hand at any given moment. Your dreams of the perfect wedding can be realized through the use of a wedding loan.

Home Improvement

Having a comfortable space that you can call your own is important. If you do not live in a space that gives you happiness and peace, then it will reflect in your mood and overall health. Whether you are adding a new room or renovating your garage, a home improvement loan can help you create a space you can truly call home.

Relocation

Rather than sprucing up the living arrangements you already have, maybe you need help with relocation expenses. Whether you need assistance paying for professional packers or professional movers, packing materials, a rental truck, storage fees, or even new location expenses, a residency relocation loan can help you. Needing to relocate, whether for a change in job or for any other personal reason, should be exciting, not stressful. Relocation can be a great opportunity for new experiences, and it should not be ruined by the expenses.

How Do I Know How Bad My Credit Is?

Do you know what your credit score is? If not, no problem! There are many online sites that allow you to find your credit score for free. Figuring out how bad, or good, your credit is is the first step in finding the right loan for you. If your credit score is not as high as you would like it to be, do not despair! “Getting a personal loan to help my credit” is a common solution.

credit score factors

But what even is a “good credit score“? Your credit score, which “expresses your relationship with credit in a three-digit number,” is good if it is between 700 to 749. Some creditors will say that they consider anything above 720 excellent rather than just good. Some consider anything over 750 as being excellent. These numbers may not mean much to you on the surface. But it may help you to understand where these numbers come from. Here are a few of the things that make up what your credit score is:

Paying Off Debt

When you apply for a loan or financing of any kind, creditors are interested in seeing what your relationship is like with credit in the past. This means, did you pay the balance of your credit card statement every month? Did you pay the monthly payments on any past loans you have gotten, and did you do so on time? Creditors want to be assured that like a Lannister you always, or at least most of the time, pay back your debt. That way they feel comforted that you will repay whatever they lend you.

Where Creditors Report

There are three major credit bureaus that record credit scores: Equifax, Experian, and TransUnion. When a creditor, such as a place where you have a store credit card, reports your credit, they will only report to one or two of the three major credit bureaus. But definitely not to all three. Because of this differentiation in reporting, not everything will necessarily be considered in each credit score. So you may only fall in the fair credit set with one credit bureau, while you may fall in the good credit set with another credit bureau.

Landlord Credit Check

The fact that creditors do not report everything to all three major credit bureaus could be beneficial to you, while at other times it could set you back. In some cases, you may even be able to run your own credit report. For a landlord credit check, you can choose the credit bureau where your credit score is best. On the other hand, you cannot tell the bank which credit bureau to use in their credit check of you, so this will not always be possible.

Why Is Having Good Credit Important

Now that you have a better understanding of how credit scores and credit reports work, it is important to understand the importance of having good credit. Though you can still do (almost) anything with bad credit that someone with good credit could do, having good credit does make life easier. Here are some reasons why having good credit is important:

Being Credit-Worthy

Since having a good credit score reflects your relationship with credit, having a higher credit score means that there is a greater chance that you will repay your loans, in full and on time. While this may not necessarily true, it can be a good indicator. Because of this, having a good credit score increases your credit-worthiness as seen by lenders.

Easier to Find an Apartment

Once you find the apartment you want, you don’t want anything to stand in your way of being able to get it. If you have good credit, then a landlord will see you as a qualified applicant. On the other hand, if you do not have good credit, then you may not be a qualified applicant in the eyes of the lender. This could decrease your chance of renting the apartment you want.

Lower Interest Rates

If you have bad credit, then you can still get personal loans, just like someone with good credit. The difference will lie in the terms and conditions of your contract. If you have a good credit score, then you will have lower interest rates than someone who has bad credit. Having good credit could save you money in the long run, since you will have to pay less in interest than someone with bad credit will have to pay in interest.

Be In The Know

It is essential to be in the know when it comes to your credit. Being in the know allows you to make educated decisions about your financial situation. Also, you can prevent any previously unforeseen issues. For instance, when you know you have a major purchase coming up in the next 6 months, you should run a credit from at least one agency.

Because consumers are allowed to get one free credit report per year, it is important to use them when they could have an effect on upcoming purchases. Being in the know also means that if there is somehow a mistake on your credit report, then you can easily spot it in a timely manner. If you do that, you can dispute and have them removed before it has the chance to affect you negatively.

Can I Even Get a Loan With Bad Credit?

Anyone can get a loan, no matter what their credit score is. Though it will be easier for someone with good credit to get a loan — and with a better interest rate — it is still possible to get a personal loan with bad credit. Getting a loan with bad credit is at least easier than getting a loan with no credit at all.

If you have been rejected for more traditional personal loans, then you may still be able to get a personal loan for bad credit. Loans for bad credit can help you get the cash you need, even if you have a low credit score. Typically, there are two reasons for taking out this kind of loan. The first is to cover emergency expenses and the second to rebuild your credit score. Loans for bad credit can be beneficial to your financial future by restoring your credit. Making timely payments on your personal loan for bad credit can show that you are reliable. It also shows you’re likely to pay off future debts, and increase your credit score.

Though you should always shop around for different loan options, credit unions specifically tend to offer options for bad credit. Because of this, you should consider looking for personal loan options at your local credit unions before searching with other sources of credit and financing.

Conclusion

Remember, even if you don’t already have good credit, or if you have no credit history at all, there’s a solution. Getting a personal loan to help credit can kill two birds with one stone. You can get the loan you need and start building your way to great credit.

Average Personal Loan Interest Rate by Credit Score

Knowing the average personal loan interest rate can help you determine whether or not you want to go forward with the application process for a personal loan. The average annual percentage rate on personal loans can go from 10% to 28%. There are different factors that go into the rate you get, including your creditworthiness, the length of the loan, the lender, and the loan amount.

Average Personal Loan Interest Rate Using Credit Score

Avarage personal loan interest rate depending on the credit score

Your credit score will be one of the largest determining factors for your average personal loan interest rate. The higher the score, the lower the rate will be. Those who have an excellent score between 720 and 850 should be getting a rate between 10% and 12%. Some individuals can even qualify for lower rates. If you don’t have what is considered an excellent score then you could consider a 0% balance transfer credit card instead of a personal loan as a way to save some money on interest rates.

Good scores are between 680 and 719 and the average personal loan interest rate is 13.5% to 15.5%. For those who have poor credit and scores below 640, the interest rate can be between 18% and 36%. Not only can the interest rate be higher but also you may have trouble qualifying for a conventional personal loan. There are other options, such as payday loans, but it can be easy to fall into a never-ending debt cycle.

Average Personal Loan Interest Rate by Lender

Interest rates on unsecured personal installment loans can range by lenders. Credit unions and banks will offer competitive rates but you may find the lowest rates from online lenders. If you have a lower credit score, you may have better luck with an online lender. Each lender will have various types of loan offerings and different ways to evaluate a potential borrower. In order to find the best average personal loan interest rate for your situation, do some comparison shopping before you decide to take out a personal loan.

What Kind of Personal Loan Should You Consider?

A good average personal loan interest rate will vary depending on what you are using the loan for, the loan term, and the loan balance. You may not qualify for the best loans a lender offers but can still be in the average. It’s best to apply to multiple lenders to see what rates you can qualify for based on your specific situation. If your rates are too high and you won’t be able to pay back the loan with the interest rate you are given then consider other options. You may also want to work on improving your credit score before you apply for the loan. Personal loans for good credit usually come with better terms.

Factors That Affect the Average Personal Loan Interest Rate

Lenders look at many different data points when they make a decision about whether or not to extend an offer to you. The biggest factors are credit score, credit history, employment stats, and debt-to-income ratio. You have probably already heard that your credit score will be the biggest factor in whether or not you qualify and it can also affect the average personal loan interest rate you get. Many lenders will have strict cut-offs for credit scores but some lenders, especially online, can be more flexible. Other factors, like your credit history, also play a role.

Your lender may consider your employment history and current financial status. Some lenders ask that you provide proof of income, whether it’s part-time or full time. Some lenders can require that you have a minimum personal or household income and if there is a requirement for this, you will need to show documentation.

You also need to make sure that you work with a credible lender. Doing your own research is always a smart idea, and you can also go to Loanry for guidance. We partnered up with Fiona to bring you reputable lenders.

Why You Should Care About Personal Loan Interest Rates

Interest rates work both ways. When you borrow money, the interest rate is the amount the lender charges you for the use of their money. On the other side, when a bank borrows money from your savings account, you then earn interest the bank pays for the use of the funds. Interest rates will drive U.S. economic growth. This will impact the costs of other loans and how much return you get from your savings.

Smart Money Tip!

By paying attention to the current interest rate, you can decrease the amount of money associated with borrowing money or you can increase the investment earnings. High interest rates will give lenders an advantage and lower interest rates will benefit borrowers. If you see that interest rates are dropping then this is the perfect time to start looking at personal loan options.

Why Your Credit Score Matters for Personal Loans

Your credit score will give lenders an idea of how you have handled money and debts against different statistics that will predict your behavior. If the statistics are against you then there will be a chance that you will be turned down for a loan. If you do get a loan then there is a good chance the interest rate will be higher if your credit isn’t good.

Why You May Need a Personal Loan

There are a number of reasons why you may want to borrow money with a personal loan. There are also different types of personal loans. Many people don’t have hundreds of dollars saved up in order to pay for expenses and need a personal loan.

You may need a personal loan to cover a medical cost, to pay for car or home repairs, or even to fund a vacation.

Getting a Personal Loan with Bad Credit

Anything under 650 is considered a bad credit score and this will make personal loan interest rates higher.  However, it’ s still possible to get a personal loan for bad credit. You may have a low credit score because you have made late payments. It is possible to get a personal loan with bad credit but it’s not as easy as walking into the neighborhood bank and filling out an application. Online lenders will give you the best opportunity to find a personal loan with bad credit. In the majority of cases, you may need someone to co-sign with you.

What Can You Do

The best option for getting a personal loan with bad credit is to loan shop. First, look at the amount of interest you will be charged. You want to find the lowest possible rate in order to save money. The next thing you want to look at is the amount of time you will be given to repay the loan, since this will also affect how much interest you will pay. Also consider the payment amount you will need to make. This will be based on the amount of the loan and the time period you have for paying it back. You want to make sure you can fit the payments into your budget and not get yourself into greater financial hardship.

Even if you need the money, there can be some cons of getting a personal loan with bad credit. The interest rate will be higher than if you were to have a better credit score. The length of time you are able to pay back the loan may also be shorter. Be sure to keep in mind that you can also be limited in the amount of money you can borrow. Personal loans can help improve your credit so it’s important that you get into a situation where you will end up improving your score in the end.

Should You Get a Personal Loan if You Have Bad Credit?

Whether or not you get a personal loan with bad credit will depend on your situation. You are the one that knows your situation best. You may be facing a medical bill or losing your home with a missed mortgage payment. This would mean you are in a situation where you need cash now and don’t have time to improve your credit score before applying.

The best chance you have of getting a personal loan with bad credit is to start before you actually need money. Evaluate your different options so you can go to a reputable place that will help you improve the chances of getting a personal loan.

Why Should I Care About Personal Loan Interest Rates?

Getting a Personal Loan with Good Credit

If you have good credit and know that you can get approval, there are still some things you should consider.

It is best to think about getting a loan ahead of time if you can. This way, you can boost your credit score even more. Refrain from any new requests and stay current on your bills to boost your score even more and get more attractive offers.  You will want to ask for the right amount of money. You need to get what you need but you also don’t want to end up with a payment you can’t afford. If you get behind on bills, including your personal loan, then it can reverse the hard work that you have put into getting a higher credit score. If you are using a personal loan to pay off your credit card debt and consolidate then be sure you are cooling it on new spending so you don’t have to be in the same position again.

How a Good Credit Score Helps You Save on a Personal Loan

A lower interest rate you get with good credit means that you that you will pay less money back throughout the length of the loan.

Getting a Personal Loan with Fair Credit

If you find out you have a fair credit score then you may be wondering if it’s worth your effort to get a personal loan.

A personal loan with fair credit may mean a higher interest rate, which means it costs you more money. With fair credit, you could still have plenty of options and this makes loan shopping even more important.

How to Get a Personal Loan

If you have already checked your credit score to get an idea of the personal loan interest rate that is available to you, there are still some other steps for getting an unsecured personal loan. Once you have compared interest rates, you can get prequalified for a loan.

Prequalifying for a loan can give you a sneak peak at the kind of offers you will get. During this prequalification process, you can be asked for some information. This includes your Social Security Number, income, monthly debt obligations, work information, and previous addresses. You may not prequalify if you have a low score, too little income, a high debt-to-income ratio, or little to no work history.

When you shop around for personal loans, compare the loan amounts, the monthly payments, and interest rates. Don’t just look at one source. Compare your other offers with other credit options. Depending on the interest rate, there may be better options to get the money you need.

Read the Fine Print

It’s important to read the fine print. This is important with every financing option, including personal loans. Make sure to watch out for prepayment penalties. Many online lenders won’t charge a fee for paying off the loan early, but some online lenders will. If you want to prepay the loan early, you will need to make sure that there is no fee. Some lenders will require automatic withdrawals. If a lender requires that then you may want to set up an alert with your bank so you can avoid overdraft fees. You also don’t want to be caught off guard with any APR surprises.

You may want to look for consumer-friendly features. This includes payments being reported to credit bureaus, flexible payment features, and direct payment to creditors. Your credit score will benefit if your lender reports on-time payments to credit bureaus. Most lenders will only report late payments that harm your credit score and not on-time ones.

When you have selected a lender that matches your needs, you will then get final approval. When you get final approval, the lender will run a hard credit check that could knock a few points off your credit score. Upon final approval, you will get the funds you need.

How to Improve Your Credit Score

There are different ways that you can improve your credit score to increase your chances of getting a personal loan and get a lower interest rate.

Pay Bills on Time

When lenders request to see your credit score, they want to know how reliable you are when paying your bills. This is due to the fact that past payment performance can be considered a good predictor of any future payment performance. If you pay late or settle an account for less than what you originally agreed to pay, it can negatively affect your score. It’s not just credit cards and loans that you need to pay on time but also your rent, phone bill, and utilities. While on-time payments for rent or utility bills aren’t usually reported, late or missed payments will be. Use the resources and tools available to you, such as automatic payments, in order to make sure that everything is paid on time.

Pay Off Debt and Keep Balances Low

Credit utilization ratio is another factor in credit score accumulations. This ratio is calculated by adding all of the credit card balances at and then dividing it by the total credit limit you have available. Lenders typically want to see low ratios below 30%. Those with good credit scores will have very low utilization rates. When you have a lower ratio, it tells lenders that you don’t max out your credit cards and can manage your credit well. You can influence your credit utilization score by paying off debt and keeping your balance low.

Be Careful about Applying for New Credit

Don’t open a new account just to have a better credit mix since it probably won’t improve your credit score much. Applying for new credit that you don’t need can harm your score in different ways, from creating too many hard inquires on your account to tempting you to overspend and then accumulating more debt.

Don’t Close Unused Cards

You should keep unused credit cards open if they aren’t costing you money in annual fees. If you close an account, it can lower your credit utilization ratio. If you owe the same amount but have fewer open accounts then it can lower the score.

Be Sure to Fix Any Inaccuracies on Your Credit Report

Be sure to check your credit reports at the three credit reporting bureaus. Incorrect information could be dragging down your scores. Dispute any wrong information and be sure to get it corrected as soon as possible.

Unfortunately, there is no quick fix for bad credit scores and you have to pay bills on time and wait. Time is your friend when it comes to improving your credit score. The length of time it takes to rebuild your credit history can depend on the negative change. Most negative changes in the credit score are because of an addition to a negative element on the credit report, such as a delinquency. These new elements will affect your score until there is a certain point. Inquiries will remain on your report for two years, while delinquencies can remain on the credit report for seven years.

It may be that you don’t necessarily have a bad credit score but you don’t have a credit score at all. A thin credit file means that a bank or lender isn’t able to calculate a credit score since there isn’t enough history. There are things you can do to improve your thin credit file, such as applying for a secured loan or becoming an authorized user on someone else’s credit card that has a good credit score.

What You May Not Know About Credit Scores

Credit scores are complex calculations and the more you know about credit reports, the more you can take control of your own credit and get approval for loans and better interest rates. Negative information on the credit report can lower the score. This information will remain on your credit report for a set period of time. Late payments can appear for seven years from the date of the first missed payment. Bankruptcies can remain on your report for seven to 10 years, depending on the type of bankruptcy.

You don’t need to carry a monthly credit balance to build your credit history. It’s possible that you can pay off the credit card bill every month and it can still help your credit standing. This not only helps your credit standing but it also helps that you don’t get into trouble with debt.  If you settle an account for less than the full amount you owe, it can also harm the score. Any time you fail to repay a debt you originally agreed to, it could have a negative effect.

A good credit score can open doors for you. It helps you qualify for the best interest rate and terms when borrowing money and influence how much you pay for other things. Landlords can even consider your credit score when you apply for an apartment.

Conclusion

The average personal loan interest rate can depend on a few different things. Your credit score will be a huge factor in what your average personal loan interest rate will be. There can be a number of reasons why you need a personal loan and the process of getting a loan will involve rate shopping. Your credit score will be a huge factor in your average personal loan interest rate. Improving your score before you apply for a loan and doing some loan shopping will help you make sure that you get the best possible rate.