Qualifying for better personal loans
What is a personal loan?
A personal loan is a type of loan that has a fixed payment and a fixed rate, similar to a mortgage or car loan. However, with a personal loan, you can use that money towards anything you want, whether you need to consolidate debt, make home improvements, or pay for school.
To get a personal loan, you simply apply, as you would for any other loan. Some loans require collateral, and others don't. Personal loans can range widely in interest rates, and sometimes, these interest rates can make a huge difference. For example, say you need to make some necessary home improvements, so you apply for a personal loan of $5,000 for 36 months. With a 6% interest rate, you will be paying about $150 a month. But with a 20% interest rate, you could be paying closer to $190 a month.
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Your personal loan will be better if you have a lower interest rate. The following are some tips for qualifying for better personal loans:
Improve your credit score.
One of the best things you can do to get a better rate is to increase your credit score-the higher the score, the better your rate will be. The first thing you will need to do is find out your credit score. You can obtain one free report a year from one of the three credit reporting bureaus: Equifax, Experian, or TransUnion. Once you have a copy of your credit, you will have a better idea of the type of loan you will get.
If you have negative marks on your credit report, make sure they are legitimate; after all, mistakes can happen. If the negative reports on you credit report are in fact legitimate, then only time and paying your bills on time will help raise your credit score. Some things you can do to make sure your credit stays intact includes:
- Pay down your credit cards. Experts recommend you keep your credit cards at no more than 30% of the maximum balance. A number of maxed out credit cards will make your score go down and lower your debt to income ratio.
- Pay your bills on time. One of the fastest ways you can raise your credit score and keep it in good standing is to simply pay your bills on time. If you have trouble doing this, or if you don't think you can make your payments, contact your creditors immediately. They do not want to send you to collections; they simply want to collect their money. Most places will work out a workable payment plan with you. You may also want to consider setting your bills up to be taken automatically from your account, so they are never late.
Eliminate debt
You may want to wait to apply for a personal loan until you have paid off some of your existing debt, such as credit cards or anything else. The higher your debt to income ratio, the higher your interest rate will be. So, pay off your lowest balance cards and cards like department store cards. Also, avoid applying for credit all the time. Resist the urge to "save 10% today" by opening a credit card for a store; each time you do this, your credit suffers and the chances you will receive a lower rate on your personal loans are lowered.
If you want to qualify for a better personal loan, these are a few tips that will help you.
