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Personal Loans for Uber Drivers: Pull Up Here

Posted on February 29, 2020 | by Julia Peoples

So, you have heard about how great it is to drive a car for Uber. Maybe you have been hearing about how much money you can make with Uber. You can set your own schedule and drive only when you want. You are excited about the new opportunity to take on a new job as an Uber driver, but you are not sure your car is up to snuff. While you need little to start up your career as an Uber driver, you do need a reliable car to meet Uber’s standards. It is possible that you can get personal loans for Uber drivers. Continue reading to find out more information about personal loans.

Pick up All the Information About Personal Loans if Your an Uber Driver

If you are considering personal loans for Uber drivers, it is important to understand all the details about personal loans. A personal loan is when you borrow a certain amount of money from a lender with the promise to make regular payments until the loan is repaid. A lender is a bank, a credit union, or even an online lender. Lenders attach interest to your loan as a fee for allowing you to borrow money. The interest rate that a lender gives you is directly related to your credit score. The higher the interest rate you receive means the more you pay each month when you repay the loan. There are many different types of personal loans that are available to you. It is important that you know where to get a loan when you are interested in getting a loan.

What Are the Different Types of Loans?

There are different personal loans for Uber drivers that may interest you. Traditional loans come from banks and credit unions. These are banks that have an actual building that you are able to visit when you require assistance. Some of these banks have online banking options, but that is not the bulk of their business. These types of banks tend to give loans to those who have good or better credit. They do not have many options available, so if you do not fall into their exact criteria, they may not give you a loan. Their application process may take longer and if you are approved, it is long before you see money in the bank. They typically also require that you have a bank account with them. You usually get better customer service with a traditional bank.

Online Loans

Online lenders were once considered for those with bad credit. That has changed over time and those with great credit have turned to online lenders for loans. As we advance technologically, online lenders are finding themselves in the right place to lend money. The customer service may not be as good because there is no person with whom you can see face to face. They do tend to have other communication methods. Online lenders offer a wide variety of interest rates and you are able to apply for these loans online and in just a few minutes. You can upload documents quickly and often get a response within 24 hours about the status of your loan.

If you are approved, the money is usually in your bank account in 24 hours. Looking for the right online lender is easy because one or two quick internet searches give you all the information you need.

Fast Cash

This type of loan gets you a small amount of money quickly but they come with high interest and short repayment terms. You usually have to repay these loans in just a few weeks and they can get you in a bad spot if you cannot pay back the loan timely.

Title Loans

Title loans use the title of your vehicle as collateral. There usually is not a credit check. These types of loans have high fees and interest rates. Usually, you have to repay this loan within a short period of time. These lenders determine the value of your vehicle and do not allow you to borrow more than a percentage of that value. If you do not repay this loan, the lender can take your vehicle. Be careful with this one as your car is your lively hood. So, why would you risk such an important piece of collateral in exchange for money today. We don’t recommend this type of loan if your an Uber driver. Your car is not a currency. Your ability to use the car to drive others certainly is a ride you can count on day after day.

Payday Loans

Payday loans are another loan where you get cash fast. These loans are for small amounts and have high-interest rates. You must repay this loan on your next payday. You give the lender a postdated check for the full amount of the loan. 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.

Some Lenders To Consider

Once you decide that personal loans for Uber drivers are the right step for you, you should shop around to find the lender that can offer you the best loan terms. There are some lenders you should consider:

Upstart

With a credit score of 620 and an annual income of $12,000, you could qualify for a loan. They want you to have a debt to income ratio of less than 45 percent. They approve of those who do not have much credit history. This lender offer loans from $1,000 to $50,000 with interest rates from 7.69 to 35.99 percent. They offer repayment terms from three to five years.

Lending Club

This peer to peer lender has a minimum credit score of 600. They want you to have a three-year credit history and less than 40 percent debt to income ratio. Their loans range from $1,000 to $40,000 with interest rates from 6.95 to 35.89 percent. They have repayment periods of three to five years. They do have an origination fee.

Avant

They accept credit scores as low as 580 but want you to have at least $20,000 a year income. They offer loans from $2,000 to $35,000. Their interest rates range from 9.95 to 35.99 percent and repayment periods from two to five years. There are a number of other lenders that may offer you better terms that fit in your budget. Do not accept the first offer you find.

Positives to Taking Out a Personal Loan When Your an Uber Driver

There are many positives to personal loans for Uber drivers. One of the upsides to a loan is that you can get the money upfront to pay for a car you need for your job for Uber. You can get the car that you need and you will be able to work for Uber while working to pay off your car. You can take the money you make as an Uber driver and pay the monthly payment to pay back the loan. And you may even make enough money that you can double up your car payments and pay off your car faster.

When you use a loan to obtain a car, you do not have to tap into your savings account to purchase your car. You are able to keep your money in your savings account for some other emergency. When you get a personal loan, the amount you pay per month remains the same so you always know how much money you are paying each month. You will not have any surprises.

✓ Get the money upfront to pay for a car you need for your job for Uber
✓ Fixed monthly payment
✓ Keep your savings untouched

Negatives to Taking Out a Personal Loan as an Uber Driver

Just like everything, when there are positives, there are also negatives. There are some negatives to taking out personal loans for Uber drivers. One of the biggest negatives to taking on a loan is that you are taking on more debt. Any loan that you accept means that you have more debt to repay. That also means that you have a higher debt to income ratio. These things may cause your credit score to decrease, even if it is just for a short period of time. If you are not able to repay the loan, you can put yourself in a worse financial place. Loans also come with fees. I will go into more detail a little further down in this article about the fees you encounter. Some loans have interest rates, which means that you are potentially paying a lot more for the loan that you really should.

One more debt on account
Possibility to decrease your credit score
Application fees

Do Loans For Uber Drivers Have Fees?

Just about every personal loan for Uber drivers has some type of fees associated with it. Lenders must disclose all fees upfront to you in the loan agreement. It is your responsibility to read the agreement and ask questions if you do not understand anything. Loans may have application fees. This is a fee that you are charged simply to apply for a loan and run a check on your credit. This is a non-refundable fee, so even if you are not approved for the loan, you have to pay it. Not all lenders charge this fee, so you may want to look for a loan that does not have this type of fee.

There are loan administrative costs associated with a lender giving you a loan. The lender passes these costs along to you in administrative fees. This fee covers all the paperwork associate with processing your loan. Sometimes this fee also includes an application fee. Some lenders combine several fees into one big fee called an origination fee. This includes the application, credit check, processing it all and paying out the money. The most important piece of all of this that you need to understand is the origination fee comes off the amount of the loan that the lender gives you. That may not seem like a big deal, but let me show you why it is.

An Example

You need to borrow $8,000 to buy a car that has a total cost of $8,000. You plan to use every bit of the money you borrow for the car. The administrative fees were $400. The amount that the lender deposits into your account is $7,600. That is :

$8,000 (the amount you borrowed) − $400 (origination fee) = $7,600 (total amount deposited).

Now, you need to come up with another $400 to buy the car.

Does My Credit Matter if I Work When I’m Looking for Money as an Uber Driver?

It does not matter where you work when you are looking for personal loans for Uber drivers, your credit matters. Honestly, it does not matter what type of loan you want, why you need it, or where you get it, your credit always matters. As I mentioned above, your credit score directly impacts the interest rate that you receive with your loan. The lower your credit score, the higher your interest rate is going to be.

Your credit score is a three-digit number that gives a lender an indication of your creditworthiness. There are about five different factors that go into determining that number, but what matters most to you is it is a direct link to the interest rate you receive. You want to make sure you protect your credit score as best you can. You want to make all of your payments in the correct amount and on time. Late or missed payments are one of the top reasons why your credit score decreases.

What Is the Difference Between Secured and Unsecured Loans?

When you are considering personal loans for Uber drivers, there are two major designations for loans. There are secured loans and unsecured loans. Most personal loans are considered unsecured loans. This means that they do not require collateral. They are more risky for the lender, so they usually require you to have a higher credit score when dealing with an unsecured loan. You may also find that unsecured loans are for a smaller amount of money. This is also because they tend to pose more risk for the lender. You can often get a quick decision on an unsecured loan, but it may not be in the amount that you really need.

Secured loans are less risky for the lender because they have some type of collateral associated with them. Collateral is an asset of yours that has some financial value to it. You are offering this item as proof that you will make your loan payments. If you do not make your loan payments, the lender can take the item you offered as collateral. Most often, secured loans are in the form of mortgages, where the house is the collateral. Another type of secured loan is an auto loan where the car is the collateral.

There are other types of collateral that can be used such as other real estate or art or jewelry. These items are often valuable and you must be able to prove their value. Secured loans are usually for larger amounts of money and have lower interest rates. Lenders are willing to offer better terms because the collateral gives them a better sense of security.

Is a Loan Right for Me?

When you are considering personal loans for Uber drivers, it is important that you assess your current situation and determine if you really want to take on a personal loan. You are the only one that can decide if a personal loan is right for you. There are some questions you can ask yourself when you are trying to figure it out. The first questions is can you afford to make the monthly payments? You may not know the answer to that question. You need to take a look at your budget and determine how much you can afford to pay each month. If you do not have any extra money to pay towards a loan then a loan might not be right for you.

If you are not making any extra money because you do not have a car to become an Uber driver, then maybe a loan to get you a car is the right step for you to take. However, you must make sure that you make at least enough money to make the monthly loan payments. If you do not think you can make enough money to pay off the loan, then a loan still may not be the right answer for you.

Conclusion

It is very important to fully understand personal loans. When it comes to personal loans for Uber drivers, there are many options available to you. No matter which one you pick, make sure that the option is the right one for you. You do not want to put yourself in a worse financial place because you have taken out a loan that you cannot afford. When considering personal loans for Uber drivers, make sure that this loan will help you get to a better place.

Julia Peoples

Julia Peoples is a long-time business manager focused on providing decision making assistance to the public. She works with people at key points of their lives who are making important retirement and financial decisions. She has had many articles published that educate the public on sound financial decision making.

Julia writes for those who are working towards financial freedom or a better understanding of how finances work. She has shared her financial insights with individuals on a one on one basis for years.

The 9 Top Personal Loans For Poor Credit

Posted on February 9, 2020 | by Julia Peoples

Is it just me, or does it seem like the cost of everything has gone through the roof? I understand inflation. Also, I understand that as the cost of materials goes up, so does the cost of the final product, but wow, I feel like costs are at a ridiculous level. I cannot be the only one feeling that right now. If people are feeling the squeeze from the rising costs, I know the need for money is increasing.

What do you do when you find yourself staring at a stack of bills you know you do not have the money to pay? Or when some expenses pop up that you have to pay? It happens every day to more people than you can imagine. Times are tough and you may find yourself needing a loan. You may find yourself in bad financial shape and needing a loan. Have no fear, it may be harder but you can find a loan to meet your needs. Continue reading to find out more about personal loans for poor credit.

Nine Best Personal Loans for Bad Credit Borrowers

I would like to focus on what you really need, which is personal loans for poor credit. I want to break that down into smaller segments, so how about we start with the basics about a personal loan. A personal loan has some complexity when you start talking about the details, but at its core, it is money you borrow and promise to repay. You are promising to repay the dollar amount you borrowed, which is the principal amount, plus the interest that the lender charges. The lender charges you interest as a fee for allowing you to borrow money. The amount of the interest you are charged is based on your credit score. Personal loans can be secured or unsecured, but most personal loans are unsecured loans.

You have looked at your budget and you know your number. Now, you are ready to look for personal loans for poor credit. I am going to help you out by giving you the top 9 loans that you should consider during your search for a personal loan.

OneMain Financial

This lender provides various types of loans, including secured and unsecured options. They offer loans in varying amounts from $1,000 to $20,000. The better your credit is, the more they are willing to lend you. They offer repayment terms of 2, 3, 4 or 5 years, so they are incredibly flexible. Of course, they reserve the higher amounts for those with better credit. They offer interest rates ranging from 18 percent to 35.99 percent, based on credit, of course. They have branch offices you can visit, or you can handle all of your business online. It is up to you.

Opploans

Opploans logo

This lender is a fantastic option if you have poor credit. They specialize in providing loans to those who are often declined elsewhere. Opploans gives you access to funds without putting you in the payday lending trap even if you have poor credit. You apply through their site and customers say things like “I got the loan right away”. Like any lender, there are still some loan shoppers who may not get offers back. It is not a guarantee. The loan amounts range from $500 to $4,000 with APR from 160% to 179%. The repayment period ranges between 9 and 18 months and there are no hidden fees. You have no obligation, so you can decline all the offers. You have to be at least 18 years old to apply, across all states.

Avant

This lender is another great choice for those with poor credit. They will give you a loan when your credit score is as low as 580. They even approve your loan if you have a low income as they have no income requirements. Their loans range from $2,000 up to $35,000. Their loan terms are also flexible at 2, 3, 4 or 5 years. Interest rates range from 9.95 percent to 35.99 percent. They do have an origination fee of as much as 4.75 percent of your loan amount.

LoanMe

This lender offers loans in limited states, but is known for fast funding and excellent customer service. You fill out the application on their site and they claim they can fund as soon as 30-4 hours. Interest also tend to be on the higher side, but they often are able to fund those within a lower credit grade. According to their website, interest rates vary from They all may be different, so may sure you know what they have to give you. The loans start at $600 and go up as high as $100,000 for those with prime credit. LoanMe is also a good payday loan alternative with an option for more if needed. A great place for a quick turnaround loan.

PeerForm

peerform logo This is a peer to peer lender. That means lenders and borrowers are matched together while removing traditional banks from the process. Individuals are willing to lend money to help others. However, you must have a credit score of at least 600. Loans range in amounts from $4,000 to $25,000 with interest rates of 5.99 percent to 29.99 percent. This lender takes a little longer to get the money to you, up to 2 weeks. There is an origination fee of 1 to 5 percent.

Upstart

Upstart is a great lender if you do not have much credit history. They may loan money if you have a credit score of 580. You must have an income of at least $12,000 per year. You can borrow $1,000 to $50,000 with terms of 3 and 5 years. The origination fee is from 1 to 6 percent of your loan amount.

LendingClub

This is another peer to peer lending facility. The loan amounts can vary from $1,000 up to $40,000. The loan terms are three or five years. Lending Club has a high origination fee of anywhere between 1 to 6 percent of your loan amount. Interest rates range from 6.95 percent to 35.89 percent. You must have a credit score of at least 600. They want you a credit history of at least 3 years and your debt to income ratio to be under 40 percent.

Prosper

Prosper logo This lender accepts credit scores of 640 and wants a credit history of 2 years. They do not have a minimum income requirement. You can have a debt to income ratio of 50 percent maximum, but no bankruptcies within the past year. They offer interest rates of around 6.95 to 35.99 percent.

NetCredit

When looking for personal loans for poor credit, this may not be the best one, but you can consider it, if you are out of options. Interest rates start at 34 percent (ouch) and can go up to 155 percent (double ouch). They accept credit scores as low as 550. You even have a day to change your mind about borrowing the money. Loans range from $1,000 to $10,000.

Where Can I Find a Personal Loan?

It is one thing to know you need personal loans for poor credit, but where to get a loan may be a more difficult question for you to answer. You may be surprised to find that finding a lender is not as difficult as you might think. The internet puts everything right at your fingertips. One quick search and you will have a list of many different lenders. There are many from which you can choose, so I hoped the list I provided will help you with your choice. I will list those later on in the article. Do not just go to the bottom of the article, stick with me for a little longer. I have some good information to share but do not worry, I will be brief.

You can find a personal loan through a traditional lender, such as a bank or credit union that has an actual brick and mortar location that you can walk into and speak with someone. You can find personal loans online. Once upon a time, there was a stigma associated with online lenders. They were only for those risky lenders with bad credit. That is no longer the case. You can find really good loan options online, so do not count them out. There are many bad credit personal loan lenders, however, not all of them have loans that will benefit you. Keep in mind that all lenders will look at certain criteria for personal loans before they decide to lend you money.

Some lenders prey on your emotional state knowing that needing money right now can make you feel stress and anxiety. Do not make an impulsive decision because that will hurt you in the long run. Make sure your decision is thought out.

Influence of Bad Credit on Loan Terms

Your credit matters and I would be lying to you if I told you something different. Your credit score directly impacts the interest rate a lender is going to offer you. When you are looking for personal loans for poor credit, you should understand that you will have higher interest rates. Poor credit does not mean you will not find a loan. It does mean you will pay more money in the long run. If you have poor credit, you may have better luck getting a loan from an online lender, so you might want to start looking there first. Online lenders have easy application processes and it goes much faster than when you go into a bank. You often get your approval in 24 hours or less. Then, the money is usually in your bank account in about 24 hours after your approval. It is a fast process.

I want to highlight for you how bad credit impacts your loan repayment. When you have poor credit, the lender sees you as a risk. They think you will make late payments, or perhaps not make payments at all. Your credit history shows them what you have done in the past and they believe you will continue to behave that way. Your credit history does not tell why things happened the way they did, so some lenders will ask you. They want to understand why you missed payments, especially if it seemed to occur during a specific time. If you have a reasonable explanation, they may be more willing to lend you money.

How Can I Improve Poor Credit?

Those are some scary numbers, right? I know and that is why you want to protect your credit as best you can. We all know that things happen that are outside of our control and you may see your credit score slipping. The good news is what goes down can always come back up and you can repair your credit. It will take time and perseverance, but you can do it. One of the benefits of personal loans for poor credit is that personal loans can help you improve your credit. When you take out personal loans for poor credit and you make your payments on time each month, it begins to improve your credit score.

You should pull your credit report. I know you probably do not want to look at it. But, you cannot bury your head in the sand. That is not going to help you fix your credit. Pull your head out and look at your credit report. Look for errors in credit report and fix them. That is a quick and easy way to improve your credit score. You should also eliminate your debt as quickly as you can. You need to focus on paying down your debt, which will bring your credit score up. Paying down your debt helps you in many ways. The most obvious is that you do not owe as much money, which relieves stress for you. The less debt you carry means the higher your credit score will be. This decreases your debt to income ratio, as well as your credit utilization. These are all good things.

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

I mentioned that personal loans for poor credit can improve your credit score. Does that mean you should run right out and get a personal loan? Not so fast. A personal loan has advantages and disadvantages, remember that. You need to determine IF a personal loan is right for you and is going to improve your financial outlook. If the answers are yes, then proceed, but with caution. You need to determine if you can afford to make the payments. You are borrowing money that you must repay every month. A loan is not a gift. You cannot let it slide and miss a few months. Remember, you must repay it every month.

You should take a look at your budget and determine how much money you can afford to repay each month. This is an important step that many people skip. They look at the amount of money they have to pay each month and they think “that’s not too high, I can handle that”. Can they really, though? If they do not have a budget, they have no way of knowing if they can actually afford it. You need to know how much money you are paying out each month and how it compares to your income. Once you see what is left over after all of your expenses, you are better able to determine how much you can afford to repay each month. You should know that number before you even apply for a loan.

Conclusion

As you can read, there are many personal loans for poor credit options available to you. Some are pretty good offers while others are not great. You should obtain the best possible loan that you can find. Remember, you do not have to take the first offer. You should take the best offer you can find. Do your research and make a good choice.

Julia Peoples

How to Find a 6-Month Personal Loan Online

Posted on August 22, 2019 | by Jackie Strauss | Leave a Comment

There are a number of benefits of personal loans. With this type of loan, you will be borrowing a set amount of money so you know what your monthly payments will so you don’t get hit with any surprises. A lot of personal loans are unsecured. This means you don’t need to have any collateral. When you get a personal loan online, you can have the money you need in as little as a day. You are also able to apply for a loan from the comfort of your home. Personal loans will typically have lower interest rates than most credit cards. If you’re interested in how to find a 6- month personal loan and other details about it, then read on.

Where Can You Get a Small Personal Loan?

A small 6-month personal loan can be something you need from time to time for everyday expenses. Whether it’s for medical debt or to pay for a vacation, there are different avenues for where to get a loan.

From a Bank

Getting a personal loan from a bank will require a decent credit score for approval of the loan. If your credit score is below 550 then you likely won’t qualify for this option.

From a Family Member or Friend

This is a non-traditional option but can work if your credit score isn’t sufficient or you don’t want to have the risk for a hard inquiry. You could have the option of getting a small personal loan from a friend or family member. Before you ask to borrow any money though, keep it professional and offer a written contract. This person should have reliable income and not be experiencing any financial tragedy.

With a Small Cash Loan

If these other two options aren’t available to you then you can also apply for small cash loans online. In order to do this, it helps to use an online lender finder service. This will allow you to search different lenders and determine if you can qualify for a loan. Many times you can pre-qualify for different loan options. Despite your low credit score, you can have the ability to choose your small personal loan options when you find one online.

What Is a 6-Month Personal Loan?

Typically the terms for a personal loan will range from 12 to 60 months. A 6-month personal loan is made for those who don’t have great credit. All you will need to get approved is an active checking account and proof of income or employment. You can then borrow up to $5,000 over a 6-month period. With this type of loan, you pay back the interest and principal in regular installments and they are usually set for once or twice a month. It helps to make sure the payments are affordable and realistic for your situation. Interest rates can be high and falling behind on your payments can have serious consequences.

Reasons to Use a 6-Month Personal Loan

These 6-month personal loans and smaller loan amounts can be used by people who don’t have the best credit and need some help getting over a hump. The reasons these loans work for people with not that great credit scores is because lenders can be more comfortable loaning smaller amounts of money to those with bad credit. These small loan amounts are usually geared toward these people and this is why the interest rates are higher.

Borrowers can use these loans for a number of different reasons that include utility bills and rent expenses, small home or car repairs, computers or other necessary electronic devices, wedding expenses, college expenses, travel, back to school expenses, birthday or Christmas gifts, replacing a home appliance, and to help with a down payment on a car.

How Does a 6-month Personal Loan Work?

A 6-month personal loan or other small loans don’t have a major amount of money. This amount usually can’t be used for something as large as a wedding but it can cover home repairs or unexpected expenses that require cash you may not have. When you get a loan online you can keep your business to yourself and not have to ask friends and family. The steps to get a personal loan are applying online, searching options, getting cash, and then making payments.

Apply Online

Getting a small personal loan online has never been easier. The entire system, from the application to repayment, can be found through a lender’s online portal. Even when you apply online you may still be required to prove your income. There are some information lenders may require. Lenders can require proof of pay stubs to show that you have a regular income and are being paid. Once the income is confirmed there are usually no extra steps and your approval will come quickly.

Search the Options

If you find the first offer won’t work for your needs then there are more options to consider. If you want to repay the loan quicker or push for smaller payments, you can search for this option. You can have the ability to customize the terms with the majority of lenders online.

Get the Cash

Once you have been approved and found a loan that works with your terms then you can upload your bank information in order to have cash deposited into your account. Cash can be deposited the next business day, which is much faster than waiting for a check from a lender and then waiting to have it clear.

Make Payments

When it is time to make payments, all you have to do is log back into the lender’s online portal to easily and quickly make a payment. You can even have the payments drafted at your convenience to make sure you are paying back the loan on time. If you want to pay back the loan early, you can log in and choose the pay back the loan in full just as if you were making a regular payment. You may want to check your loan terms for any pre-payment penalties to make sure you won’t be hit with extra fees if you do choose to pay back your loan early.

How Long Does It Take To Get a 6-Month Personal Loan?

The entire process can be quick and easy and can be as fast as 24 hours from the time you apply to the time you get your cash. If you have more time then you can spend more time searching your options. Many pre-approvals for a loan will be valid for about three days. The pre-approval stage only take as long as getting the key information required to the lender to upload. Once you have been pre-approved then it’s up to you to search for options and confirm the loan option you choose. Once you review the loan options then it’s time to continue the application.

Online Loan Companies Usually Work Faster Than Banks

The online application process can take anywhere from fifteen minutes to half an hour, depending on the information that is required. Once the information is gathered then the lender will usually take several minutes in order to determine approval. Once you have been approved then cash should be in your bank account by the next business day, as long as your loan was approved prior to 5 p.m. If the loan is processed after then it could be another business day in order for you to see the funds. However, this is still faster than receiving a check from the bank or a local lender.

How Is a 6-Month Personal Loan Different from Other Short-Term Loan Options?

There are other alternatives to a 6-month personal loan. Payday loans are also short-term loans and are usually for $500 or less. These loans are typically due on your next payday. Auto title loans are also another type of short-term loan. However these loans have higher interest rates and will usually use your car’s title as collateral. You may have to repay the loan back within 30 days, although some lenders do give longer options.

Three-month loans can usually give you up to $5,000 and can be a reasonable option if you can’t qualify for a personal loan. However, it can be hard to find lenders that offer short-term loan amounts. The longer term will make the loan more expensive. Long-term loans can have lower interest rates overall for borrowers that have good credit.

Do You Need Proof of Income for a 6-Month Personal Loan?

A lender, even for a 6-month personal loan, will want to see proof of income before you get approved. For an individual who is regularly employed, this shouldn’t be an issue. However, it can be harder for non-traditional employees. These people may be self-employed and don’t give themselves a paycheck.

In order to show proof of income if you don’t have a regular paycheck, there are some things you can do. There are other means of income that lenders will accept. A W-2 is a tax document that will tell a lender how much money you made in the previous year. Lenders can also accept tax returns if your are self-employed. A signed letter from an employer is another proof of income that lenders can accept. You may also use bank statements, which shows that your employer has made regular deposits in the account.

It can be difficult to get a personal loan without proof of income. There are other ways to get loans that may require some collateral.

Choosing Between Different Loans and Lenders

When searching for a 6-month personal loan, it is important to not rush and choose the first available option. This loan is going to affect your life for some time, even if you do pay it off quickly. There are some things to consider when choosing the right loan.

The Loan Terms

You have to look at the loan terms. Many different factors will vary from loan to loan and you have to be careful to notice these differences. Be sure you know what the interest rate is and how it is calculated. Is it fixed or variable? It is compounded yearly or monthly? It is added to the loan amount? It’s also important to understand if the payment amount due each month is only for interest or if some of it is also applied to the principal.

The repayment terms are also important. How long do you have to repay the loan? And how often do you need to make payments? How does the loan need to be paid? Knowing everything about the loan before accepting it will help make sure you don’t end up in worse financial trouble. If the loan you are approved for requires shorter repayment terms or larger payments than you expect then choose a different one. Don’t get yourself in a deep hole.

Purpose of the Loan

There are different types of personal loans and the loan you choose should be based on the purpose of the loan. If you just need some financial assistance to make a purchase or pay a bill then a loan option that doesn’t require collateral will work. If you are using the loan to build credit then you want to make sure you pick a loan type that will get reported to a credit bureau. Payday loans and title loans don’t get reported unless you fail to repay them. When you consider the purpose of the loan, you can choose the best one for your situation.

If you are choosing between applying for a loan online or at a brick and mortar lender, know there are some differences. Applying online can be much faster than driving around and filling out paperwork over and over again. When you apply online, you can start the application for multiple lenders at once. Some brick and mortar locations will hand out cash while others will give you a check and you need to wait until it clears. Online lenders will deposit loans into your checking account when you are approved.

What Are Some Loan Eligibility Requirements?

Every loan company will have a different set of eligibility requirements. Many lenders look at the debt-to-income ratio, along with if monthly payments are made on time. If you can’t afford monthly payments then you may not get approved. Other lenders will look at career experience, financial history, and education level. Lenders can require the borrower to be 21 years of age and have a steady income. Many lenders want their borrowers to have a steady job with a minimum annual income. There are also credit requirements and many lenders will factor in the credit score.

What Do You Do if You Have Bad Credit?

There are still some ways to get personal loans with poor credit. However, there are some things to keep in mind. You will need to know the distinction between a secured and unsecured loan. Secured loans require collateral to use as backup. Unsecured loans don’t require any collateral so they are riskier for lenders. With poor credit, you may only have the option for a secured loan so you need to know what you are using for any collateral. You should also expect the interest rate to be higher. Extending the length of the loan can be tempting in this case since it will lower the monthly payments but you will end up paying more in interest.

You will also need to prepare more when getting a personal loan with bad credit. You will need to have copies of financial documents, bank statements, employment information, and more. This paperwork will be submitted with your application. If you don’t have a good credit report then you will need to do more work. Don’t be discouraged if you are rejected from one lender as there are more opportunities available. You may be able to ask why the application was rejected so you know if there are ways you can improve.

Conclusion

A 6-month personal loan can help you out if you need cash fast. These loans are a little different than other short-term loan options and can be used for a number of different reasons. You can use a 6-month personal loan to get by on bills or to make sudden home or car repairs. There are different places where you can get these types of loans and each has its own advantages and disadvantages. It helps to know the process of how to get these loans and what to look for when you are choosing between different lenders and different loan options. You will need to show proof of income but even if you have bad credit, there are still options for you to choose from that may have higher fees and interest.

Jackie Strauss

Jackie Strauss is a finance writer with a background in economics living in Los Angeles. She has a passion for helping readers learn more about personal finance, insurance, home loans and paying down debt. As a college student during the Great Recession, she has had to learn budgeting and money saving techniques to become a new homeowner.

How to Get a Personal Loan to Repair Your Car

Posted on July 15, 2019 | by Brandy Woodfolk | Leave a Comment

When it comes to frustrating events, car trouble ranks somewhere around the top of my list. It is always unexpected – especially if you do not know enough about vehicles to easily feel or hear a change in performance. Not being able to get around when you need to is a horrible feeling, and you want to do anything to change it, even if it means going into debt and getting a loan to repair your car. That should be the last resort though not the first choice. Let’s look at some questions you need to ask yourself before getting a loan.

Before Getting a Loan to Repair Your Car

It may be tempting to jump up and decide to get a loan so you can get your car fixed quickly, but is it really necessary? Do you have some savings you could dip into instead? Will a family member pay for it and let you pay them back in payments? Getting a loan to repair your car is a big deal. It is a financial responsibility that has the potential to mess up your future if it is not handled correctly. So before you choose to take on this responsibility, be sure that it is your only option in paying for repairs.

New batteries or other minor issues probably will not cost much at all. Small purchases such as these should be easily covered with a paycheck or credit card, if you have one. More serious issues will cost much more. In this case, getting a loan to repair your car might be necessary.

Is It Worth the Cost of Fixing It?

Be honest with yourself: is it worth the amount it will cost to fix it? If it is a used car that needs thousands of dollars worth of work, it might be better to count your losses and start working toward a new car, instead. This is obviously a personal decision but try to be logical when making it. If you do not know the value of your car, you can find out through the Kelly Blue Book or something like Carfax.

The vin number should give you all of the information you need about your car. If the value is less than the repair costs, unless you are keeping the car for sentimental reasons, your best bet is to get a new one.

If you determined that the cost of repair is worth it, but too high to cover it on your own, then a loan might be a good option for you. Here’s the next step.

Where to Get a Loan to Repair Your Car?

If you have decided your only option is to get a personal loan to repair your car, that’s okay. You are not the first, and you most certainly will not be the last. What is important now is that you find a loan with terms and interest rates that you can easily handle- if at all possible. To do so, you most likely need to emergency repair loan shop.

While you can drive around town- if your car is still driveable- and physically apply in person at multiple places, I cannot imagine a better time to shop online for loans than when your car is in questionable condition. Instead, let Loanry simplify the process. You can find a lender on our site from your couch in your PJs. We do not lend the money ourselves but instead, you find a lender without the hassle.

Types of Loans for Auto Repair

Once you have exhausted every other avenue you can think of, you might only be left with the option of getting a loan to repair your car. If that is the case, you need to know what types are available and which ones to steer clear from.

Emergency Repair Loans

There are loans known as emergency repair loans. This simply means that the lender tries to process your application faster, often as fast as the next day. Thanks to the fast application and processing times, you might get charged a higher interest rate than you would with another type of loan.

Payday Loans

I am sure you have heard of them, and yes, payday loans are an option. If you choose a payday loan though, there are a couple of things you need to understand. Most first time payday loan borrowers do not get approved for more than $150, so this probably will not help you much if the cost of your repairs exceeds that amount. Also, these interest rates are very high, so if you must take out a payday loan, pay it back asap.

Title Loans

Title loans are also available, but may not be viable if your car is broken down. Most title loan companies- those that you walk into, anyway- take pictures of your car as part of the application process. If you cannot drive your car, they will likely not approve you.
With online title loans, the requirements may be different but that will depend on the lender. If you do get approved for a title loan, pay it back as quickly as you can, and definitely pay more than the monthly payment. Being committed to a title loan for three years is not something anyone wants to do.

Personal Loans for Auto Repair

I tend to be much more partial toward personal cash loans than any other type of loans. The interest is usually much lower and figured into the payment. You get a longer time frame to pay it off. Generally speaking, they just seem much fairer to borrowers than many other loans- especially payday loans and title loans.

Personal loans are designed for long term borrowers. And, unlike title loans-which actually fit the category of short term loan– the monthly payment includes the principle, so it is possibly to actually pay them off without have to eat Ramen noodles and crackers for years to come. If you apply for a personal loan to repair your car and are approved, you receive the loan amount all at once.

If any fees are associated with the loan, such as origination fees, they are usually subtracted from the amount you borrow. The total amount you owe, including fixed interest, is then spread out into monthly payments for the extent of the repayment term. So what exactly are the benefits of getting this repair loan to fix your car?

Personal Line of Credit

A personal line of credit is another fair option, but it works a little differently. With a personal loan, you are given the entire amount upfront, minus any fees. With a personal line of credit, you are approved for a certain amount which is then put it something similar to a savings account. The full amount is available to you if you need it, but you do not have to borrow it all. The interest is only calculated according to how much you have taken out.

Perhaps you withdrew $300 from your $1000 credit line for the tune-up and tires. With the extra work, you might need another $300 or so. No problem, just head back to the bank or your other financial lender and withdraw the extra $300. You can continue to withdraw more money until you reach your credit limit- in this case, that is the $1000. Lines of credit are very helpful when you are unsure of the amount you actually need.

Secured Loans

Another type of loan to repair your car is a secured loan. A secured loan is not necessarily separate from the other loans mentioned. It may just be an additional characteristic, and it just means that the lender needs you to put up some collateral to ease the risk they are taking. Most often, those with low credit scores or unfavorable financial conditions are the ones that need collateral.

Both payday loans and title loans are secured loans, but there are definitely some with less harsh terms. Some financial institutions will use your title as collateral without it being a traditional title loan. The loan itself is actually an installment loan. Your title is just in the financial institution’s hands until you repay the loan. The interest rates with secured loans are often much lower.

Other than vehicles, lenders consider collateral such as real estate property, valuable electronics and jewelry, and even certain types of investments or bank accounts. Lenders have their own guidelines about what they will accept, but the bottom line is that if you default on the loan, they can sell your collateral to recoup their losses.

Why Get a Personal Loan to Repair Your Car

In my opinion, the biggest benefits are the simplicity, the clarity, and that they are designed to be paid off- not keep you in an endless loop of debt. Let’s say you get a $1,000 personal loan to repair your car. The money is then in your possession and you head off to the mechanics shop. The lender gave you a contract that explained exactly how much your monthly payments will be and how long you will pay on it.

The bill for your repairs is only $400, so you have $600 left of the loan for auto repairs. So what do you do? We are going to ignore the temptation to spend for a minute and think about this. There are a few wise options for this extra cash.

One is that you ask the mechanic to go ahead and fix another issue that you know needs to be taken care of soon.

You can also place the $600 in a savings account with intentions of using it to make your monthly payments. That means it is also there if you need it again. You never know what might pop up next.

Finally, you might pay off another monthly bill whose interest is hurting you. We will use a credit card with a $500 balance for example. The interest is 25% and that is more than you can handle paying on a regular basis, so the balance grows. If you use the additional $600 to pay off that credit card, you are helping yourself in two big ways: you are getting the credit card off of your credit and you are making it easier to repay the personal loan to repair your car. Regardless of how you use it, your monthly payment and terms remain the same.

Steps for the Future

As much as I wish it were, it is just not possible to prevent all future car issues. You cannot control a nail in the road, you cannot control the weather, and you definitely cannot control how other people drive. So it is safe to assume that you will experience more car trouble at a later time. What you can do is minimize your chances of car trouble and decrease the impact it has on your life by doing regular maintenance and creating an emergency fund for these types of situations.

Conclusion

When you are met with the inevitable headache of car trouble and need some type of repairs, you have a few options. Though a personal loan to repair your car is an option, do not make this decision lightly. Be ready to commit to the loan until it is fully repaid. And, of course, apply only through trusted lenders to prevent any additional headaches, like scams and identity theft. Be wise and diligent in all of your financial decisions.

Brandy Woodfolk

Brandy Woodfolk is an educator, home business owner, project manager, and lifelong learner. After a less than stellar financial upbringing, Brandy dedicated her schooling and independent studies to financial literacy. She quickly became the go-to among family, friends, and acquaintances for everything finance. Her inner circle loves to joke that she is an expert at “budgeting to the penny”. Brandy dedicates a large portion of her time to teaching parents how to succeed financially without sacrificing time with their little ones. She also teaches classes to homeschooled teenagers about finances and other life skills they need to succeed as adults.

Brandy writes about smart money management and wealth building in simple and relatable ways so all who wish to can understand the world of finance.

www.linkedin.com/in/brandy-m-woodfolk/

A Guide to Understanding the Personal Loan Process

Posted on July 14, 2019 | by Julia Peoples | Leave a Comment

Let us face it, most of us need a loan at some point in our lives. Unless you are independently wealthy, you are going to find a time when you need a loan. Most of us cannot, or choose not to, put out a large sum of money for large purchases, such as a car or house. You may even need a loan for smaller purchases.

Or, you may find yourself in a position where an emergency arises and you need money fast. Those are times when you may need a consumer loan. I understand that the thought of a personal loan may be a scary one. We are going to make the process less scary with this guide. We are going to share many tips, including where to get a loan.

Personal Loan Process – Step by Step

The amount of money you pay per month depends on how much you borrowed, the length of time and the interest. We will talk more about interest a little bit later. A personal loan can be used for just about anything. The lender typically asks you what you plan to do with the money, but they do not use that reason as a determining factor.

Step 1. Apply For A Personal Loan?

You have decided that you want to get a personal loan, but you do not know where to start. You know you need to do some loan shopping to find the right one for you. The easiest part of the loan process is the application process. Depending upon on what type of lender you choose, the application process make vary slightly. The easiest of all applications is an online loan.

You simply fill out the online application and submit it. After that submission, the lender determines what documentation is needed. You must then submit those documents online. If you pick a more traditional lender, you have to go into the bank and fill out the application.

At a traditional bank, they have representatives that help you fill out your loan paperwork. When using an online lender, you have to fill out all the paperwork on your own. It is really a simple part of the personal loan process. It may take you more time to collect the documents for the bank than it does to fill out the application.

What Documents Do I Need for a Personal Loan?

As I stated above, the application process is fairly simple. There is always documentation that the lender asks of you. The first thing you need to provide is proof of identity.

This should be something that has your picture and name on it, such as a drivers license, military ID, or passport. You also need to provide proof of income. You can do this with paystubs, W 2 forms, tax forms and documents, and bank statements.

The lender may ask you to provide proof of your rent or mortgage payment and your utility bills. You should expect to provide any of this documentation within a few days notice. The lender may also ask you for proof of any retirement or annuity payouts you might be getting. You can always ask why they need the documents, but keep in mind, failure to provide them may mean you are denied.

Step 2. Credit Check

You may think that your credit score should not be a big deal, but lenders think it is. Your credit score is a large part of the personal loan process decision. So, let us spend a few minutes on credit scores. Your credit score is a three digit number that could stand between you and a new house, or car. It can, in some instances, even prevent you from getting a job. So, it’s really important and you should understand why.

It may seem like only a number to you, but to a lender it signifies how risky you are when it comes to loaning money. Credit scores range from 300 to 850. The lower your credit score, the worse your credit is considered. Anything above 700 is considered a good score. Anything below about 650 is starting to get into the fair to bad range. Most people fall into the 600 to 750 range. The reason for most credit scores dropping is late or missed payments. It is hard to get and maintain a good credit score.

It only takes one or two mistakes and your credit score decreases. If your credit score is low, you can bring it back up but it does take consistent and hard work. You should protect your credit score and do everything you can to not let it fall below what is considered good.

What if I Have Bad Credit?

If you do not know what credit score you have, you should pull your credit report and take a look at it. You want to make sure there are not any errors on your credit report. If there are errors, you should work to get them fixed. If you can fix some of the errors on your credit report, you should be able to improve your credit score. Once you know what is on your credit report, you can decide how to handle it.

If you do have bad credit, you can still get a loan. It may be a little harder and requires more work on your part, but it is possible. When you have bad credit, some banks will not approve you for a loan. Other lenders, like credit unions and online lenders, are more willing to loan you money with bad credit. The interest rate is going to be higher, so you end up borrowing more money.

The lender may require that you have collateral. A loan with collateral is a secured loan and it means that you are using something, such as a car, house, or jewelry to secure your loan. If you do not pay back the loan, or default, the lender can take your collateral and own it.

The good news is the lender gives you one last chance to bring the loan current so you do not lose your collateral. If you do not have the best credit, you need to shop around to find the best loan for you. Most importantly, read all the fine print and understand the personal loan process.

Step 3. Lender Decision

Once you apply, the lender sends your application to the underwriter. This is part of the personal loan process where you just have to wait. You do not have anything to do during this time. It can also be the most frustrating part of the process because you truly have no control. You just wait and see what happens. You may be asked for more information during this process, so be prepared.

During this time, the underwriter looks at all of the documentation you provided, checks it and double-checks it. The underwriter looks over your credit report, reviews your income and debts and does some other administrative tasks. If your loan is approved, the rest of the documents are filled out and sent back to the lender. The lender contacts you and lets you know it has been approved or denied.

This is when you confirm the amount for which you are approved. The terms of the loan are outlined for you, including the interest, your monthly payment and how many months you must pay back the loan. Up until this point, all of the numbers are tentative and considered subject to approval.

What Do Lenders Look At When Approving A Personal Loan?

Lenders look at different pieces of information when determining approval for a loan. Income and credit score are two of the major factors a lender uses to determine approval. Let us table credit score for just a moment and focus on income and some of the other factors. Most lenders want you to have a job, or a steady stream of income.

There are title loans that depend solely on the title of a vehicle, but we are not considering that type of loan in this situation. Lenders want to verify your employment. They ask for paystubs and bank statements. They may even want to call your employer. Not only are they interested in how much money you make, but how long you have been with your employer.

Lenders determine your stability based on how long you have stayed at one job. If you bounce from job to job, they may think you are not stable and therefore a risk for lending money. They also want to have faith that you can pay back your loan. A stable income indicates that you should be able to repay. The more money you want to borrow, the higher the lender wants your income to be.

Step 4. Sign Credit Agreement

One of the most important pieces of your loan is the interest rate. As I mentioned before, the lower your credit score, the higher the interest will be. Ultimately, that means you borrow more money.

Lenders use your credit to determine the annual percentage rate (APR). Interest rates can vary anywhere from 5 percent to 36 percent. Those with the best credit get loans with an interest rate of 5 percent. Those will poor credit end up with 36 percent interest.

The best way to illustrate this is with an example using numbers. If you plan to borrow $10,000 and have 5 percent interest, that means your total interest is $500. You borrow $10,500 from the lender. If the term of your loan is 36 months, that means you will pay $291.67 per month.

Now, let me show you how that changes at 30 percent interest. You borrow $10,000 at 30 percent interest, which makes your total interest $3,000. The total amount you have borrowed from the lender is $13,000. Your monthly payment becomes $361.11.

With a higher percentage rate, you end up borrowing $2,500 more and pay about $70 per month. I have shown you two extremes here to really emphasize my point. You should shop around for the best rate for you by spending the time to look for the right lender for you. This helps you save money in the long run.

Are There Fees With A Personal Loan?

When you are looking for a personal loan, always look at the fine print. Personal loans may have fees associated with them. They are part of the personal loan process and it is important to know about them ahead of time.

Origination Fees

Some of the fees of which you should be aware are origination fees. An origination fee covers the administrative costs associated with the loan. It covers all the paperwork that occurs. The origination fee is rolled into the loan payment.

Application Fee

A lender may charge an application fee. This is a fee simply for you to fill out the application. This is a fee that you must pay out of pocket before the loan is even processed. If your loan is denied, you still have to pay the application fee. All other fees are charged as part of an approved loan. If your lender is charging you an application fee, you may want to find a different one. There are many lenders that do not charge this fee.

Late Payment Fee

There is a late payment fee. This is typical for most bills. If you pay the bill late, there is a fee you will pay. The fee varies with each lender, so be sure to read the contract. You also want to determine if the fee increases with each subsequent late payment. In addition, when you make a late payment, it can have an impact on your credit.

Early Payment Fee

Another fee your lender might have is an early payment fee. Sometimes, this may be called an early termination fee. The lender may charge you this when you pay back all the money you borrowed early. The bank makes money off of you by charging you interest. When you pay off the loan early, they lose the interest on that additional time. They may charge a fee to offset the money they are losing. You must be sure that you understand all of the fee associate with the personal loan process of the loan for which you apply.

Step 5. Get the Money

The amount of money received can range anywhere from $200 to $100,000 depending on your credit, the lender’s loan amounts, the amount you request and more. Money can show up in your account as soon as tomorrow.

Is A Personal Loan Right For Me?

Ultimately, you are the only person that can answer that question. You must decide for yourself if you should apply for a personal loan. However, there are some factors that can assist you in making that decision. First, do you really need one and can a personal loan fit within your budget. What is your intention for the loan and is it something you really need? You should also ask yourself, does a loan payment fit into your budget.

In other words, can you afford to pay it back? You really must take a hard look at your budget. Remember, while it is nice to get a large sum of money, you always have to pay it back. Once you use that money for something else, you still have to make monthly payments. The first step is understanding your budget. You should know how much money is coming into your bank account. You also should know how much is going out of it. Then look at what is left. If it is zero, or close to it, a personal loan may not be for you.

Which Lender Is Right For Me?

There are so many lenders on the market willing to lend money. You get emails offering you special rates. You still get mail in your mailbox with all of their special offers. Perhaps, you’ve even seen commercials on TV. But how do you know which one is right for you? There is no magic involved. The right lender for you is the one that gives you the best deal and fits your parameters.

The lender that gives you the money you want to borrow with terms that are agreeable to you. A lender that makes sure you are comfortable with the personal loan process is the right one for you. Make sure whichever lender you pick, it is a credible one. Make sure you understand all the fine print and the lender is willing to answer all of your questions.

It’s important that the lender you’ve choose is reliable and serious. Don’t just go with the first lender you find. Do your research and pick the best option.

Should I Consider An Online Loan?

I am sure that you have heard of cash loans online. You may have heard something like get money fast. Or even, fast cash in your bank account. While those are typically presented by online lenders, not all online lenders are alike. Online loans are on the rise as one of the top ways to apply for a loan. The process is super simple:

You fill out a quick application online from the comfort of your home. Then you supply the necessary documents by uploading them online. You usually get an approval within 24 hours of completing the application. Then the money is in your bank account within 24 hour of the approval. It really is the simplest personal loan process you can do. Do not get too excited, yet. Online lenders can be great. There are a few things to keep in mind.

Smart Money Tip!

One is that you can often receive a higher interest rate from an online lender. This is not a hard and fast rule, but there is a high chance. Pay attention to the bottom line. Look at the interest rate and make sure it works for you. Do not get sucked in by how fast and easy it is. Fast and easy might cost you more in the long run. Just pay attention and know what you are signing.

Applying with an online lender can be more risky. There are many people out there looking to scam people out of money. These people prey on those in desperate situations. Someone looking for an online loan might be desperate and might not be as vigilant as he might be in a different situation. Scammers now this and look for easy targets. Do not be an easy target. Always do your research.

Always find out information about a potential lender. Lenders must be authorized to do business in your state. Make sure the lender has proper certification. Make sure that you can find information about the lender and do your research. Spending a few hours researching a lender can say you a lot of headache and lost money in the long run. Your financial security is worth the extra time. As always, read the fine print and understand the terms of any contract you sign.

Conclusion

We have gotten to the end of the guide to understanding the personal loan process. We hope that you have a better understanding of the entire personal loan process. There are some key points that we really want you to take away from this guide. You must know that your credit score matters and can make a huge impact on your loan and how much money you end up paying.

You need to understand how your credit score is calculated and what impacts it. It is important that you read the find print of any loan application that you sign. Make sure you are getting the best loan for you with the best rate. Most importantly, you need to make sure you can afford to pay back the loan. You need to take a hard look at your budget and determine if you can actually afford to pay back the loan.

Remember, protecting your credit is the most important thing you can do. You do not want to do something that hurts your credit.

Julia Peoples

Your A+ Guide to the Five C’s of Credit

Posted on July 13, 2019 | by Brandy Woodfolk | Leave a Comment

There have been a couple of times in my life that loan approvals and rejections have utterly shocked me. I have seen some people with really low credit scores get approved, and some with really high ones get rejected. It seemed so twisted, especially since I grew up hearing that your credit score was the “be all, end all” when it came to financial success. I realized very quickly that I had been given some bad information. Credit scores, it seems, are only a factor in the equation.

How Credit is Calculated

If your credit score is only a portion of the decision, what else is considered? Basically, anything that can show them whether you can repay. The bottom line with a consumer loan, or any other loan, is that the lender wants their money back, and they add certain things into the equation to determine if they will get it back or not. Your credit is not determined by a single item.

Instead, it is an equation of multiple factors- all of which speak to your ability and possibility of repaying the loan. These factors are lovingly referred to as the five C’s of Credit.

Understanding the Five C’s of Credit

Have you ever heard of the Five C’s of Credit? I like that name because it tends to lighten the seriousness- just a little bit. While credit is a serious thing, being way too serious and stressing out about it will only hurt you. Stress is a killer, so we are going to keep this on a less serious note as well. The five c’s of credit are going to help you understand credit terms and decisions a little better.

Imagine you are going on a trip to fabulous Honolulu, Hawaii. You want to take a friend along but cannot decide which friend to take. You want to be fair in your choice, so you decide to look at each friend objectively. Though you are paying for the trip up front, the friend you choose will have to pay you back and cover their own food. As there is money involved, you score each according to the following five categories:

The Five C’s of Credit: Character

Five Cs of Credit Character
The first of the five c’s of credit is character- the one I happen to think is the absolute most important. A person’s character can lead one in the decisions he or she needs to make- like relationships or loaning money. In very simple terms, when it comes to the five c’s of credit, the character is based on credit history.

As far as your credit goes, your character is determined by your known previous financial actions– just as you scored your friends according to their known actions. The decisions you have made in the past speak to your character, to whether or not you are likely to repay the loan. In fact, whey judge your character by how likely it is you will be 90 days late or later in a two year period.

You may be saying, “But I’m in better financial shape now. It’s not fair that they judge how I will do now by what I did in the past. I was a stupid kid, then.” I know- I have had those same thoughts run through my head before, but you have to be fair to financial lenders, as well. They have no way of seeing the future, so they have to go by your previous actions.

It has often been said that past behavior is a predictor of future actions. How else can a lender decide if it is safe to loan money to you? However, while your character is a part of your credit worthiness, there are four other parts that are looked at. So while there is no guarantee, you might still have a shot at borrowing if the other factors look pretty good.

The Five C’s of Credit: Capacity

The second of the five c’s of credit is capacity. While character can be judged more subjectively, capacity is pretty straightforward. It is simply the ability one has to repay.

Lenders look at income capacity to see whether or not you have the ability to repay the loan. If your outgoing money is more than your income, they will say you do not have the capacity to afford a loan. And, truthfully, how comfortable would you be loaning someone money that did not have a way to repay you?

It would be better to just give them the cash and not expect it back. Though some friends may do that, do not expect a financial institution to. They want you to have an income that outweighs your ongoing debt.

The Five C’s of Credit: Capital

Capital If one of the friends you are considering offers to put up half of the cost up front, you are probably most likely going to choose them- or at least move them to the top of the list. Why? Well, for one, they are easing your financial burden. If they put up half and you put up half, it is a lot less stress on you. Second, it shows that they really want to go and are serious about doing their part.

The same is true with lenders. When you apply for a mortgage loan, the lender usually wants you to pay a portion upfront. It could be as low as 2% and can go as high as the lender wants. The same is true with car loans- lenders want you to put up a down payment. And honestly, can you blame them? They are putting money towards something for you- something that may cost them a lot of money.

With you putting at least a portion of the cost down, it shows you are serious about this purchase. It means you have some skin in the game, so to speak. You have invested in it, so you are more likely to pay off the loan instead of losing your investment. It’s really that simple.

The Five C’s of Credit: Collateral

Capital is not the same as collateral, though they have been confused a bit. Remember that capital is your friend paying a portion of the cost up front. Collateral, on the other hand, is something your friend lets you hold until they repay you. It could be a piece of jewelry, a piece of stereo equipment, or something else that they find valuable. The agreement is that if they do not repay, you have the right to sell that collateral to make back your money.

In the loan world, collateral may be a car title, a check, a piece of land, or anything else the lender finds valuable enough to regain their money. While collateral does not necessarily guarantee approval, it does improve your chances because a secured loan- a loan attached to collateral- is less of a financial risk for the lender. If you are applying for a loan, it might be wise to have something in mind that you can use as collateral just in case.

The Five C’s of Credit: Conditions

Conditions are just what it says- conditions surrounding the loan. That may seem pretty straightforward but there are many conditions that might affect approval.

A lender has to consider all conditions. Of course. things such as the terms of the loan, i.e. principle and interest rates, need to be factored in. How else will you or the lender know if you can afford the loan? However, there are other factors that are beyond the borrowers’ control that still have to be considered- such as the housing market, in general. A borrower has no control over the condition of the housing market but it can prevent loan approval.

The Equation

While numbers themselves might be absolute, the ways they are calculated can change quickly. Those five c’s of credit we just discussed are all consistent factors of the equation, but the level of importance of each of them can change from lender to lender and loan to loan. Here is the thing many people I know do not pay attention to: your credit score is not all that lenders look at. And, for that matter, your credit score is not just figured according to how much you owe or how much you have paid off. It is based on a mixture of things.

When lenders check your credit report, they will be looking at all of the factors, but the weight of those factors will be different. While one lender may place more importance on character another may consider capacity more important. With secured loans, collateral is often the most important factor. With home and car loans, capital is probably going to rank higher. There are some lenders that only factor in your capacity and, possibly, your collateral.

Finding a Lender

The bottom line with this is that there is no concrete equation that you can plug everything into so you will know if you can get approved. Most lenders will have their own equation, so you will only know for sure when you apply. And since the equations differ among lenders, just because one says, “No”, does not mean they all will.

So if it is so different among lenders, how do you know where to get a loan? You will have to credit shop. This means searching for the type of loan, rates and terms you want among multiple lenders. Then, you apply at each of them because that increases your chances of finding a lender to approve you.

Yes, I know- it sounds time-consuming. It can be but it does not have to. That is why places like Loanry exist. We help you find a lender. You simply fill out your information, and we find a lender that may fit your situation. If a lender wants more information, they will ask you for it, but you are not wasting time applying for loans that are not even in reach. It simplifies the process completely.

What To Do If You Do Not Get A Loan

If you have exhausted your lending options, cannot find a loan that meets the terms you want, or you are through looking for some other reason, you have two options: give up completely or make yourself a more desirable borrower for the future. Though it can take time, persistence, and a strong will, you can improve your overall credit and increase your odds of approval by using the five c’s of credit to do so. Just follow these steps:

Build Your Credit Character

Remember, character is about your credit history, so to build your character you have to improve your credit history. How can you get credit to improve your credit if you cannot get credit? That’s a great question. Perhaps you could not get credit in the ways you were trying to, but there is something else you can do.

Go to your local bank or credit union and deposit some cash into an account- probably around $500. Don’t freak out yet by saying you do not have $500 to spare because you do not need it to spare. Go to the loan office of that credit union or bank and apply for a secured loan using the cash you put in the account as collateral.

Explain that you are looking to rebuild your credit and you would like to start with this secured loan. Most likely you will be approved because they will usually approve you for the same amount that you have deposited. Again, there are no guarantees, but it is very likely.

This type of loan is good for you because you get the same amount you deposited- meaning you are not losing money, and neither is the bank if you decide not to pay. If they did not approve you for some reason, you can just withdraw your money. Easy as pie.

If you are approved, though, you can begin to rebuild your credit. Make timely payments each time so good marks go on your credit report. For those that can spare any of the loan, put it away to use for payments. Make each payment to the best of your ability. Once it is paid off, do it again and again until you no longer need collateral.

Increase Your Capacity

Again, your capacity is determined by your income versus your consistent outgoing funds. The goal is for the incoming to exceed the outgoing. To do this, pay off any bills that you can, renegotiate things like your cable, and any other item you pay that could be gone or at least decreased. At the same time, increase your income. Ask for a raise, apply for a promotion or a new job altogether, or pick up a second job.

Add Some Capital

If you want to purchase a house, or other large purchase, you need some capital. The amount of capital lenders want fluctuates according to the market and other conditions, so it is hard to put a dollar amount on how much capital to have. However, determine a goal according to the current rates, and once you find or make that amount, apply for something that fits with that.

For instance, let’s say you are aiming for a $100,000 house and lenders are currently looking for 10% capital. This means you need $10,000. When you have that amount together, you find that they are now looking for 20% capital. You have three choices:

Wait to see if the amount goes back down
Find the other $10,000
Find a home for $50,000 so you already have the capital ready

Obviously, that choice is yours. If you are looking for the home you plan to stay in for the next 50 years, you probably do not want to compromise on the type of house you buy. On the other hand, if you are moving to a different state because of a new job that will only last a few years, you could be more flexible.

Decide on Collateral

Having some collateral to put up will generally increase your chances of approval, though it is not a decision to take lightly. Understand that collateral means the lender can take that property and sell it as a means to recoup their losses. While I sincerely hope that you have no intention of defaulting on a loan, life does happen, so you need to be mindful of the collateral you use. You should choose collateral that will not throw a huge wrench in your life if you lose it.

Let me put it like this: collateral needs to have some value or it is of no use as collateral. A car is valuable monetarily, but it is also valuable as your vehicle. It is most likely what gets you and your family back and forth to where you all need to go. So, before putting it up as collateral, really think about it.

Do you have another vehicle you can use? If not, can you easily walk back and forth to work or take public transportation? Basically, can you continue the things you need to do without that vehicle?

Lenders may require a certain type of collateral, so you may only have the choice between using your car title or not getting the loan. If that is the case, you must simply decide if it is worth the risk. Collateral may improve your odds of getting the loan, but you do not need it hurting you in other ways.

If you are unsure of why you are not getting approved, there are ways to find out. First, when you apply and are denied, the lender is supposed to send you a letter in the mail explaining why. It might say things like, “Too many delinquent accounts”, “Judgment including bankruptcies”, “Not enough open accounts”, or something totally different. You can use these notes as a starting point.

Additionally, you can obtain your credit report for free. Once a year, you can get a free copy through each credit bureau: TransUnion, Experian, and Equifax. You want to get a copy from all three because there tends to be different things on each. To get a comprehensive view of which of the five c’s of credit need the most work, you need to see what all you are fighting against.

Also, when you get denied for credit, you have a certain amount of time to request a free copy of your report. The letter that you received from the lender will give you the information to do that. These are just two ways to keep an eye on your credit.

There are a few things that I do to keep a constant eye on mine. I am signed up with Credit Karma and CreditWise through Capital One. I love both because they alert me when something changes for better or worse on my credit. This is great because if something is not right, like a charge I did not make, I know pretty quickly and can take care of it. I also love them because they break down my credit and give me suggestions for improvement.

How to Evaluate Your Credit

No matter how you do it, it is important to keep an eye on your credit, and to consistently evaluate it against the five c’s of credit. The quicker you know these things, the better. To lighten the burden, though, when I say consistently check your credit and evaluate it, I do not mean daily- or even weekly. The first time you look at it, it will take a little bit. Be prepared to spend some time really working through your credit reports. After that first time, though, once a month or so should be enough.

Pick the first three debts you wish to pay off. I know a lot of people say to list them all at once, but I tend to find myself irritated when I do this. For one thing, the list looks like a mountain I cannot climb. Second, credit changes consistently. If I go through the trouble of listing them in order just to have to change it next month, I am probably not going to continue. Building credit is tiring enough without adding extra work. So pick three and start working. Pluck at it as much as you can- even if it’s $5 a month. It will add up.

Lastly, look at your credit report with fresh eyes. Pretend you are the lender. Would you loan to this person? If not, why not? Which of the five c’s of credit need to be worked on the most? What could the borrower do to change your mind over time? Make a list of those things and turn all of this information into a strategy that you can follow.

Conclusion

Whether you are looking for a loan or building your credit, you just might need to be a bulldog. Have your goal in mind and push toward it until you reach it. For assistance shopping for cash loans, Loanry is standing by to help you find a lender that may suit your need. For assistance building your credit, enlist a trusted friend to push you when you feel like giving up. No matter your goal, you can reach it if you are ready to fight for it.

Brandy Woodfolk

Brandy writes about smart money management and wealth building in simple and relatable ways so all who wish to can understand the world of finance.

www.linkedin.com/in/brandy-m-woodfolk/

How to Establish Credit History When You Have No Credit History?

Posted on June 30, 2019 | by Myra H | Leave a Comment

Young adults and students are often frustrated by the problem of having no credit. It seems unfair, but almost every business or service requires a good credit rating before you can purchase their goods or services. Up to a few years ago, the young and students had no recourse but to use Mom’s and Dad’s credit card to establish credit history of their own. This did nothing for their own credit, though.

Fortunately, there are over half a dozen ways to establish credit history if you have no credit. Credit is no longer strictly about credit cards. Paying your rent on time (and that’s if you can find an apartment with no credit history,) paying your bills on time, and other solutions we’ll discuss here all add up to a credit history. First, though, those with no credit should understand how and why it works.

Understanding The Basics Of Credit

If you’ve never paid on a car loan, a mortgage, or had a credit card, then the Big Three (Experian, TransUnion, and Equifax) don’t know you’re there. They call this being “credit invisible.” If you’ve paid off a loan or used a credit card maybe once or twice, the Big Three call this “credit unscorable.” There simply isn’t enough information with which to give you a credit score, good or bad.

You’d be surprised how many people – 26 million to be exact – deal in cash. They buy large ticket items like cars from Craigslist, rent an apartment or room detailed by friends or family, and make monthly payments on other things outside the credit arena. Some don’t even have bank accounts; they pay their bills with Post Office money orders. Thus, they have no way to establish credit history.

The Way Lenders See it

You have bad credit due to the fact you haven’t shown a responsible repayment history. To the credit bureaus, they know nothing about you because you’re “invisible”. It’s easy to see how credit is a necessity, because cash and checks are usually not accepted in many places. How many times do you stand behind someone at a restaurant while they write a check for their meal? You can’t order pizza without a credit card, pay for something on Amazon or even get groceries without a credit card.

That’s not all. Anything in life requires a credit check. Applying for a job often calls for a credit check. The employer needs to see that you are a responsible person which means paying your bills on time. If you need health, auto, or home insurance, expect a credit check. These people need to know that you’ll pay them. Even the power company checks your credit. If you don’t have any or bad credit, expect to pay a hefty down payment as security in case you don’t pay your bills.

Establish Credit History with No Credit History

There are ways to establish credit history if you’re beginning from scratch. The gold standard of creditworthiness is FICO scores. Each little thing you pay for shows up there. Hold your chin up, you got this. Here’s how.

☛ Get A Credit Builder Loan

This is one of the most painless ways to establish a credit history. Go to a bank or credit union with which you have a relationship. A credit builder loan is one in which you borrow a specific amount of money. They will hold the money in an account to which you won’t have access.

You will make monthly payments. When the amount is paid off, you will receive your money minus the interest you paid. They will report to all three credit bureaus your timely monthly payments which will establish credit history for you.

Most credit builder loans offer a range between $300 and $1,000. The point is not how much you borrow, but being able to repay the loan on time each month. Borrowing more than you can repay might mean late payments or no payments at all. Be very sure you can afford the monthly payments before you begin the process.

You’ll be paying interest on the loan. Some lenders don’t return the interest when the loan is paid off. Some return a portion of the interest which they call “dividends.” Read the contract carefully, and make sure you understand the interest, fees, and whether or not the lender will return none, all, or a portion of the interest at the end of the loan.

Since you’re doing this to build credit, some lenders won’t do a credit check on you. Instead, they’ll check your banking records. Here they will find if you have any bounced checks, and if you pay your bills. These things might affect your approval for a loan. You’ll need to bring with you:

Name, address, and phone number of your employer
Paycheck stubs
If you’re self-employed, you’ll need tax returns to prove income
Housing payments
Checking and savings balances
References

Important pros of Credit Builder Loan

Two of the most important pros of obtaining a credit builder loan are that you’re basically paying monthly into a savings account. This teaches you discipline. The other pro is that when you go for other loans, you’ll have the experience and knowledge of taking out just the right amount and the ability to pay it on time every month.

☛Build Credit With Your Parents’ Help

Mom and Dad usually have at least one credit card. You can ask to be an authorized user of their cards. You won’t have to have a card of your own; just use theirs. Ask your parents to contact the credit card company to see if they report the authorized user’s payments to them. You need to be sure of this. Otherwise, your efforts will be for naught.

Be prepared to make your payments on time each month. If you don’t, you’re messing over the beginning moves of establishing credit history as well as causing your parents’ payments to be late or non-existent. They could end up with bad credit which serves no purpose for either of you.

The biggest pro of being an authorized user on someone else’s credit card is that their credit history makes yours look good. You don’t even have to use the card. The primary card holder’s credit is reported on your credit report. How cool is that?

☛Build Credit With A Co-signer

If you have a parent, another family member, or a friend with good credit, you could ask them to co-sign a small personal loan in order to build or establish credit history. The payments you make will be reported to the credit bureaus, and you will establish credit history.

The only downside to co-signing a loan is that if you default on the loan or your payments are late, then the co-signer is responsible for paying the loan. Both your credit will be adversely affected. There might possibly be ill will between the two of you. Make very sure you make your payments on time for both your sakes.

☛Build Credit By Paying Your Bills

A great number of people assume that their rent, utilities, phone bill, cable, and insurance among others are reported to the credit bureaus. The fact is that the credit bureaus only see this information if you’ve failed to pay and the debt goes to collections. The only credit entity that does get these reports is FICO. So it does pay to pay your bills in a timely manner.

If you want the credit bureaus to be notified of your timely payments on bills, then contacting a third-party reporting agency is your best bet. Two such agencies are Credit Karma and RentTrack. Be aware you might have to pay a yearly premium for this service. It’s worth it, though, to be able to build your credit from nothing.

Young man using credit card for paying bills on laptop.

☛Build Your Credit By Buying A Car

The first credit most young people have is buying a car. Once you’re out of school or college, you have to get around to find a job. Buying a car is a sensible way to accomplish this. Make each month’s payments on time, and you will establish credit history.

☛Build Your Credit With Student Loans

Nine out of every ten students get their education with student loans. You may have a grace period before the student loan organization begins reporting your payments. In any case, pay them on time every single month for a good credit rating.

Applying online to a college usually means Sallie Mae. However, if you’re wondering where to get a loan, most lending institutions offer student loans. The rates and fees will vary, but they are another method of getting student loans.

What Credit Bureaus Look For?

Credit bureaus look for five things when they check your credit. The first is a history of payments, how much you use your credit, how long you've had credit, hard hits on your credit, and your credit mix. When you use both revolving and installment credit and pay them off on time, your credit gets a boost.

☛Build Your Credit With Store Cards

Sears, JCPenney, Kohl’s, Exxon, Mobile and dozens of other companies offer their customers brand credit cards. If you spend lots and lots of money with these and other stores, chances are pretty good you’ll pay your monthly credit card bill.

The best way to handle store credit cards is to buy with it only what you would have bought with cash. Pay the entire balance each month on time. Ask the credit department if they report to the three credit bureaus.

Let’s Talk About Credit Cards

No one gets a credit card before they establish credit history. Credit cards are how the Big Three credit bureaus recognize people. With a credit card, you are no longer “invisible” or “unscorable.” Here are ways to get one.

Secured Cards

This is when you put $200 or $300 in the bank and let it sit there for a year or so. Don’t touch it. The bank or credit union will see this as collateral for a secured credit card. The amount in the bank or credit union is usually the credit limit on the card. You won’t be able to make large purchases, but when you make the monthly payments on time, the bank or credit union might give you an unsecured credit card a couple years down the road. In both cases, they will report your timely payments to the credit bureaus.

Secured cards were never meant to be used forever. The purpose of such a card is to build or rebuild credit. When you qualify for an unsecured card, then you can close out the secured card account. Make sure the secured card has low annual fees.

Store Cards

If you work for a major department store, a place like BF Goodrich, or you manage a Mobile gas station, chances are good that you could get a store credit card. If you’ve little to no credit, then your credit limit won’t be very high. Pay it off on time every month for at least a year, and the company usually raises your credit limit. It all goes on your credit report which gives you a track record.

Starter Credit Cards

These were devised for young people with no credit history. Adults with bad credit can start all over again with a starter credit card. Some are secured by amounts as small as $49, while others are regular credit cards. Some carry annual fees while others don’t. The credit limit is usually $300, but you’ll run into some pretty high interest rates to the tune of 20 percent.

The goal is to pay as little as possible when it comes to fees and interest. Make sure to pay the balance on time and in full if possible. In time, you’ll be able to qualify for a regular credit card with better fees and interest. Capital One offers a starter card with no annual fee just to give you an example.

Student Credit Cards

To qualify for this card, young people must be registered at an accredited four-year college. This is an easier card to qualify for, and some even offer perks like cash back. Pay the balance on time and in full, and you’ll be on your way to a good credit score.

Subprime Credit Cards

This is absolutely the last resort for anyone trying to establish credit history. These cards are usually sought by those who have tried other avenues and failed. Those with no credit at all and those with bad credit are not turned away.

The trouble with subprime credit cards is that they hit you with astronomical fees and interest. The government has tried to regulate them, but they find ways to get around it. This is a do it at your own risk thing, but we’d be doing you a serious disservice if we didn’t at least let you know that it’s there and to beware of it’s bad points.

Let’s Talk About Loans To Establish Credit

We’ve talked about car loans to establish credit history, credit builder loans, and student loans. For every thing you need to pay for, there seems to be a loan for it. Sometimes they’re called personal loans, sometimes payday loans.

There are two types of credit: installment credit and revolving credit. Installment credit is when you pay back money loaned on a car or a mortgage. Revolving credit is when you pay monthly charges against a credit card. The card revolves because the credit is available once again. Credit bureaus want to see a variety of credit on your credit report, so a good mix of both gives them a reason to approve your credit.

Let’s talk about personal loans first.

Personal Loans

Personal loans are installment loans that require a certain credit score to get favorable rates. You apply for a certain amount of money, sign the paperwork, and receive your funds. You will repay the money each month with interest and fees. Now you can borrow any amount, but it’s best to keep the amount low enough that you won’t have trouble repaying it. The loan terms are usually one or two up to six years to repay the loan. Make sure you pay it on time each and every month. Ask the loan officer to report your monthly payments to the Big Three credit bureaus.

Payday Loans

Payday loans are given to people in sudden emergencies that need to be paid for right now. They are based on repayment from your next paycheck. Those just beginning to build a credit history should stay away from payday loans. They charge an insane amount of interest and fees. This often makes it hard for people to repay. They take out another payday loan to pay off the first one. You can see the trap people fall into. These aren’t reported to the credit bureaus.

Conclusion

Know that we all understand your frustration at being too young for a lot of things. You’re old enough to vote and drive a car, but you can’t have credit. We understand how it feels to wonder what to do and where to go for answers. We hope this conversation helps you at least get an idea what to look for when you do begin your credit journey.

You should know that before you look online for personal loans, there are companies that don’t lend-they direct. You explain your needs, your time frame, the amount of money you need to borrow, and they can help you find a company that might fit your needs. They don’t lend. They know bunches of lenders, though, so their website is an interactive framework in which you find a lender for you. Without these free services, you’d have to do all the footwork yourself. We’d like to help, so let us know how your credit journey is going.

Myra H

Myra has written in a range of styles encompassing white papers, finance blogs, credit product descriptions, how-to manage finance pieces, professional articles for lawyers, finance experts, web designers and more. She has written for an equally wide range of clients on the topics of loans, personal finance development, credit reports and scores, taxes and many more.

Myra worked in a bank as a young person and has dealt with payment processors in the past few years in her financial services endeavors. She therefore understands how the system works.

Line of Credit vs. Credit Card: Swipe Here or Draw?

Posted on June 29, 2019 | by Brandy Woodfolk | Leave a Comment

When it comes to finances, there are so many terms and definitions that it is easy to get confused. Many of these terms sound similar, and the available definitions on Google often serve to only add to the confusion. Not everyone is a finance guru, so some of us appreciate much simpler definitions. After all, how are we to know what to apply for or what we are getting into if we cannot even understand the textbook definitions?

For the moment, we are going to speak about the two often confused terms and how they differ: line of credit vs credit card. And for those of us who appreciate simplicity, we will be breaking the terms down into useful definitions and explanations. The simpler, the better, in my opinion. Let us begin.

Line of Credit VS Credit Card: Which is Better?

In truth, it is a matter of need and preference. Both offer benefits and risks. Both can be harmful and helpful. Each can be either the answer to your prayer or temptation you do not need. Either way, in order for you to choose between a line of credit vs credit card, you need to understand them on a basic level in order to make an accurate assessment. Below you will find the pertinent information needed to decide on a line of credit vs credit card.

Benefits of a Credit Card vs Line of Credit

First and foremost, the credit is available when you need it, as long as you are paying on it. You have the convenience of pulling the card out when you need it and simply swiping it. There is not waiting for the cash to be put in your hand. As long as it is available on the card, you are free to use it.

Minimum payments are usually not very high, so you probably will not have a hard time making those payments. My credit card has a minimum payment of $25 per month. Even during the tight financial months, I can usually squeeze $25 into the budget without too much stress. Also, making timely payments can improve your credit score as well as increase your credit limit on your card.

Drawbacks of a Credit Card

One of the biggest drawbacks of a credit card is that the minimum payment required is not really helping you at all. That is because the interest on credit cards is compounded. In simple terms, compounded interest means that it is added monthly. If your interest rate is 10%, your interest will be 10% of the balance on the card for that month. Next month, the interest will be calculated again, and added on top of the previous interest. So, if that is the case, what do you suppose happens if your minimum payment is lower than your interest?

In the simplest answer possible, you will dig yourself into deeper debt every single month. Let’s say you have a credit card with a $200 limit, and that card charges 20% interest. You used $150 of your available credit and your minimum payment is $25 per month. Follow along below to learn what happens if you only pay that $25 minimum.

	Month 1	Month 2	Month 3	Month 4
Total Due:	$150	$155	$161	%168.20
Interest Rate:	20%	20%	20%	20%
Interest Due:	$30	$31	$32.20	$33.64
Total w/Interest:	$180	$186	$193.20	$201.84
Payment:	$25	$25	$25	$25
Balance:	$155	$161	$168.20	$176.84

As you can see, your interest is higher than your payment, so paying only the minimum payment will not get you out of that debt. These numbers are just examples- yours might be higher or lower. The key to getting out of credit card debt is to always make more than the minimum payments. Many cards do not add on interest until the end of the billing cycle. If it is possible for you to pay all or at least some of your balance before then, you will save yourself some cash.

Secured VS Unsecured Credit Cards

As with most loans, there are secured and unsecured credit cards. Secured cards can be of great help to those who have no or low credit. Basically, you pay a deposit on the card, and the company issuing you the card will hold that deposit. Once they have received the deposit, they give you credit. Sometimes, you have to put up the entire amount of credit as a deposit, and sometimes it is just a portion.

For instance, if they are giving you $200 in credit, they might require that you pay as low as $50 as a deposit or may require that you pay the full $200 as a deposit. This minimizes their risk, which is why they are willing to give you credit. If you make timely payments for a set amount of time, the deposit will be returned. Also, they report to the credit bureaus. So even though the cards are secured, they can improve your credit.

Unsecured credit cards are simply approved or not according to your previous credit, your ability to repay, and your promise to pay.

Hands holding plastic credit card and using laptop.

What is a Line of Credit?

A line of credit is slightly different from a credit card in how it works and is given. Let’s go back to the example of you and I being besties and you needing some money. You again ask me for money but this time you have different needs. Maybe you want to take some classes at the community college and you have to pay cash. We know that the classes will cost $1,000, but we have no idea what the materials and supplies you need will cost.

This time I say, “I am going to open a bank account and put $3,000 in it. You can borrow anything you need up to that amount. I will leave that money available to you to borrow as often as you need for the next three years as long as you pay the agreed upon interest.”

You take the $1,000 for the classes and register. Two days later, you receive a list of textbooks you need to purchase and find out the total of them is $600. When classes start, you learn that there are lab fees and other costs you had no idea about. Fortunately, it is not a big deal because you still have $2,000 in the account. You take the $800 you need and leave the rest for future use.

The following month, you pay the required interest on what you have borrowed plus $200 on the principle. Now, you still have $1,600 available when you need it. Every month you pay more than the interest, you are replenishing your line of credit. Though some variables may change, this example is the basic idea of a line of credit.

Benefits of a Line of Credit vs Credit Card

One of the major benefits of a line of credit is that you have access to cash. While you can get a cash advance on a credit card, it is generally not a high amount and the interest is often higher. Plus, there are often fees for getting a cash advance. With a line of credit, the expenses associated are often lower than that of a credit card.

You also have flexible repayment options, usually from one year to more than ten years, and the APR is most often lower than that with credit cards. Lastly, there are very few restrictions, and they are an open ended credit line.

Drawbacks of a Line of Credit

First, the interest rates are usually variable, so your interest may change from month to month unlike a fixed rate loan. Lines of credit generally require an account at the financial institution you are borrowing from and a very good credit score. Additionally, you will likely find yourself paying both monthly and yearly maintenance fees so long as the line of credit is open, even if you are not using it.

Secured VS Unsecured

Most lines of credit are unsecured. This means that you provide no collateral. However, as the lending institution assumes a higher risk, it is more difficult to get a line of credit vs credit card, personal installment loan, or other loan options. If you get approved, though, you have a revolving line of credit that can be handy when you are in need.

Similarities and Differences

Now that we have broken down each separately, let’s take a closer look at which is better between a line of credit vs credit card. The two are similar in the sense that in ways, they are both lines of credit. As you generally borrow, payback, and replenish your credit card funds, it is technically a line of credit.

However, a line of credit is often much higher than a credit card. Credit cards are generally a few hundred to a couple of thousand dollar limits, though some may go higher. Lines of credit can start as low as $1,000 and go as high as the institution allows, though most cap out by $100,000. The highest most go are $25,000.

Interest Rate Differences

You will also typically notice a difference in interest rates in a line of credit vs credit card. These differences can vary widely, as well. Some credit cards offer 0% APR for the first year. With lines of credit, you begin paying interest the moment you take out any of your available credit. However, when interest rates begin, lines of credit often run from 9% to 23%.

Credit card interest rates usually start at 23%, though you may find some a little higher or lower. It is also important to remember that with a line of credit, the interest rates- unless stated otherwise- are variable. You may find yourself paying 9% one month and jolting to 23% the next. This makes it rather difficult to budget your payment.

Also, as previously mentioned, most lines of credit require that you have an account with that institution. This is not always the case with credit cards. In fact, some credit card companies do not have other account types.

Lastly, consider the actual rewards when it comes to a line of credit vs credit card. Most credit cards offer some type of reward. It might come in the form of cashback, airline miles, or other rewards. I have yet to find a line of credit that offers any reward beyond borrowing the money and building your credit- if you pay on time.

An Invaluable Lesson

There is one major downside that comes with both options. Regardless of your choice between a line of credit vs credit card, both can impact your credit hugely. If you have never looked at your credit report or really paid attention to it, I am about to tell you something really important, so pay attention: the more you borrow, the lower your credit score. If you borrow more than 30% of your available credit, your credit score drops.

Wait- what? But doesn’t it look good if I can borrow a lot of money?

Yes, unless you are borrowing it. I know, it sounds crazy, but it is true. The percentage of your available credit that you use at a time is called “credit utilization”, and it is a big factor in your credit score. The lower your credit utilization, the better your score. At the same time, they want to see you use credit. There is just a fine line between using it and using it too much.

Let me help you draw that line

If you have a $200 credit limit, the maximum you use should be $60. If you borrow more, try your best to pay it down to 30% before the billing cycle closes. Keep the amount you borrow as low as possible. However, do not ignore your credit. Sadly, using no credit can hurt you about as bad as using too much.

Which Should I Get: Line of Credit vs Credit Card?

A major factor in this decision is what you need, or will use, the money for. Are you looking to make a large purchase? Paying ongoing extra expenses, like the college example? Or is it more for everyday expenses?

If you just need something to help you put gas in your car or to buy groceries and tissue between checks, a credit card should suffice. If you want to buy a car with cash, need to make repairs to your home, or something similar, you should probably go for a line of credit.

Then again, maybe it is best not to choose between a line of credit vs credit card. Consider applying for both. Just because you have them does not mean you have to use them. If you get approved for both, you can leave them alone until you need them. How much peace of mind would it give you to know that you have money to the side in case you need it? Everyone needs a rainy day fund. Perhaps these credit types can serve as a rainy day fund until you can save one separately.

Line of Credit for Planning Ahead Security

Also, it is likely a good idea to apply for a line of credit long before you actually need it. Let’s say your car breaks down- a common occurrence for the fortunate among us. If you have no money put to the side, or money available to you through credit, you will have to find a way to cover it. If you apply for a line of credit then, it may take a few days or more to be approved. That means you will be stuck worrying about how to get around until you find out if you were approved.

On the other hand, if you applied and got approved for a line of credit months in advance, the stress would lessen. After the initial shock, frustration, and, “What do I do?” reaction, you will remember that you have some money available. You just need to get to the bank to retrieve it. Before you know it, you are back on the road. The bottom line is that it is better to be safe than sorry, so applying for both a credit card and line of credit well before they are needed might turn out to be very beneficial to you.

Conclusion

As you can see, making a choice between a line of credit vs credit card is a personal and situational choice. However, you may find it helpful to have both available to use depending on the situation you face. Another similarity between the two is that lenders for both are widely available. When you are trying to decide where to get a loan or where to credit card shop, Loanry can help. Whether you are searching for a line of credit or a simple credit card, we can help you find a lender that may suit your needs.

Brandy Woodfolk

Brandy writes about smart money management and wealth building in simple and relatable ways so all who wish to can understand the world of finance.

www.linkedin.com/in/brandy-m-woodfolk/

Unsecured Loans in California As Soon As Tomorrow

Posted on June 26, 2019 | by Blaine Koehn | Leave a Comment

Personal loans can be used for anything an individual needs. Anything other than business, but sometimes people use them for start up cost. Otherwise, it will be a business loan. Either a loan for working capital, advertising, business expansion, and the like. You can use a personal loan for emergencies, holiday expenses, car/house fixtures, shopping, and other personal needs.

Also, when it comes to personal loans nowadays, there are many choices available with more lenient requirements. We no longer live in a day when the only way a person can get a personal loan is by going to a traditional bank or credit union. Nor in a day these financial institutions require you have what some refer to as the three C’s – credit, cash, and collateral.

Unsecured Loans in California

We live in a time now when you can get a California personal loan even with bad credit. There is no need for collateral. When it comes to cash, you must show proof of income. However, you don’t have to have a lot of money. You just need a steady monthly income that is as low as $800 a month in some cases.

There are so many personal loans available that you can get with fewer requirements now. Furthermore, these personal loans can be categorized as secured personal loans and unsecured personal loans. They vary in terms and interest rates. So, there is a personal loan out there that is just right for you.

Where to Get a Loan

Getting a loan is easier than ever before. You don’t even have to commute to a traditional brick and mortar company many times to get a loan. Just from the comfort of your home, you can loan shop online. And even if you are still required to go to a physical building after loan shopping online, there will point you to personal loan companies near you in California.

There are unsecured personal loan companies in several locations in California throughout cities and towns across the nation. You can start by searching online for the right personal loan company instead of wasting gas or bus fare to travel from place to place. While checking online, you’ll see guidelines to determine whether the business suits your needs. You will also be able to find out what information you should provide to complete the application process. You will most likely be able to complete the application process online. Loanry cuts the time you spend researching. We can connect you with reputable lenders right away.

From there, you can proceed by either getting the results of your application or by getting instructions on where to complete the rest of the application process. You may also obtain instructions on the information that they will require you to submit. (i.e., proof of income, bank account information, driver’s license, etc.). If applicable, there will be a location nearby to complete the loan process that they will tell you.

What You May Likely Need for the Application Process

As mentioned before, many of these companies approve loans for bad to good credit, no collateral, and so forth. In these cases, these loans are considered to be unsecured personal loans. However, even though unsecured loans in California are convenient in that you are not required to have the three C’s; there are other details you must follow in order to go through the smoothest application process possible. The following includes other details most likely needed to complete the application process quickly and efficiently:

✓Obtain Clarification About Your Preferences

Before going to a financial institution, you should perform your due diligence. For example, know what lenders look for on your credit report and what other items they might collect. The aim is to find out the details of the application process and other terms by thoroughly checking loan packages. Especially when you California loan shop online. Please be aware of the type of loan you want and the terms that are affordable to you.

✓Ask Questions

You can contact the business via phone, instant chat, their online form, or email. Make sure to ask all the questions to ensure you have all areas covered. You also can make sure they have loan packages you desire. Other questions to ask the company include loan eligibility, timelines for the application and approval process. Of course don’t forget to ask about the required documents and materials. Different financial agencies have different requirements and finding out the requirements upfront will save you a lot of trouble.

✓Find out the Limitations

Even though many agencies accept bad credit applications, they have their limitations concerning the lowest credit score they will approve. There may be other guidelines, such as the least amount of steady income you must have, the acceptance of their terms, and the interest fees.

Personal Installment Loans

A California personal installment loan is a consumer loan that is paid on a fixed schedule with a principal and interest rates. The length of time to pay off these loans can range from a few months to several decades. You can use these loans for various reasons. Also, these loans are typically more affordable and safer than title and payday loans. As mentioned these loans can be secured or unsecured personal loans.

Personal installment loans can be retrieved fairly easily as well. You can accept a personal installment loan offer on a network. Also, you can carefully read the loan offer terms before accepting the terms. You also can digitally sign the agreement. The funds could enter your account within 24 hours to a few days, depending on the lender. For instance, unsecured loans in California will normally can enter one’s personal bank account within 24 hours. These loans are not secured but unsecured loans in California which have a log of competition and being unsecured makes less paperwork required to show collateral, for instance.

When Should I Receive My Funds?

Depending on the lender, you should receive your funds within a few days, though it could vary from one business day up to several weeks. They will typically deposit the funds into the checking account you specify during the loan process, and you can then withdraw them as cash, spend them via your bank card, or use them to make payments and purchases online like any other funds.

With an installment loan, you’ll not only have a significantly lower interest rate, but you’ll be able to make regular monthly payments and be more likely to stay on track. Plus, those regular payments can also help you boost your credit score when you make them on time each month. This can help ensure you’ll have an easier time finding the financing you need in the future.

If you can’t qualify for a personal installment loan due to your bad credit, you should still explore every other option you have before taking on an expensive and potentially dangerous short-term loan. That includes consumer credit cards, as even the worst subprime card will charge less interest than a payday loan.

How Soon Can I Get an Installment Loan?

If you apply right now for a personal installment loan then you can potentially have anywhere from $500 to $25,000 cash in your bank account as soon as tomorrow morning. That’s right, tomorrow morning, but not in all cases!

Lender’s sometimes even accept applications 24 hours a day – 7 days a week but all final processing for California cash loans is usually done during normal business hours and funds could be sent via ACH directly to your bank account.

You can borrow between $500 and $25,000 instantly. However, personal installment loans are usually based on your income and therefore only borrow the amount you can afford. The lender will certainly allow you and even encourage you to repay the loan in full any time you can afford it.

More Details on Secured and Unsecured Personal Loans in California

California secured personal loans are loans in which lenders require borrowers’ to make pledges or promises of collateral for the loan if the individual defaults on it. The most common types of secured loans are home or auto loans. If the home goes into foreclosure or the car gets repossessed, the lender can retrieve the home or auto, auction it, and then bill you for the rest if the balance is not paid in full after auctioning it. Because of this, carrying full coverage insurance may be required for your collateral when it comes to a secured loan. This way, the lender will have a shared interest in the home/car which will protect the both of you.

There are much more unsecured loans in California and other places in the market than secured loans. This fact is good for those without collateral even though lenders know that the risks are higher with these loans.

What About the Sorted Risks Associated With Those Loans?

Another difference between unsecured personal loans and secured personal loans is the sorted risks associated with either type of personal loan. With the secured personal loan, you can lose your home or car when you default on the loan. With unsecured personal loans, lenders may report negatively on your credit, they may put a lien on your home, or they can garnish your wages when defaulting on a loan.

Different Types of Unsecured Personal Loans

There are also different types of unsecured personal loans available, including student loans, personal loans, and credit cards. These loans are all term or revolving loans. The other type of unsecured personal loan is called the consolidation loan. A revolving loan is a loan with a credit limit that you can repay, spend, and spend again. Personal lines of credit and credit cards are examples of revolving unsecured loans. A term loan is a loan that requires the borrower to pay in equal installments until they pay off the balance in full. The consolidation loan is a signature loan from a bank used to pay off credit card debt in equal installments until the balance is paid in full.

Other Important Notes

With all these wonderful features about unsecured loans, there are some things to take into consideration. For one, these loans are riskier to lenders, so these loans carry higher interest rates. Also, these loans require higher credit scores many times. In these cases, these loans don’t require a perfect credit score. As a matter of fact, these average scores can be an average score of 620, for instance.

In 2020, California’s income per capita was $38,576 among various professions and regions, thus ranking 11th place among the states in the US. Some areas in this state have a greater need for finance than other areas in the state, and thus, different types financing is required. Furthermore, borrowers of unsecured loans in California with average credit scores of 580 to 720 are typically approved for these personal loans.

Payday loans are considered unsecured personal loans that provide merchant cash advances. Even though these loans may be partially secured by these companies requiring an agreement to permit automatic bank withdrawals from the applicant’s checking accounts and a postdated check, it is still known as an unsecured personal loan. There is no need for collateral, like your car or home. These types of loans have a short term, comes with a higher interest rate, and you typically pay them back in a single lump sum on your next pay period.

What Else Do Lenders Take Into Consideration?

Besides the stipulations concerning income and credit score, lenders take into consideration other details when it comes to being qualified for a personal loan in California. Lenders look at the debt-to-income. Even if your credit score is fairly descent if you have more debt to the amount of your income, the lender still may reject you. Also, even if your credit score isn’t so great, paying back your credit score will be a spectacular way to improve your score. Lenders will report to credit agencies and through consumer reports that can help you greatly to obtain future credit and loans.

Several ways to improve your credit for improving your chances to get approve d for a personal loan include the following:

Following your total payments’ groupings
Choose which groupings to make several small payments to become current on bills
Lower balances and request for an increase of credit limit
Improve credit utilization and eliminate card balances by using debt consolidation loans
Pay on-time to improve your credit

Other ways to improve your chances of getting a loan include feeling and looking organized. You must be confident to go through the loan application process.

Conclusion

Unsecured loans in California are an amazing relief for us these days. You can use these loans for any personal thing or situation an individual needs the loan for. You can use unsecured personal loans for emergencies, holidays, car/house fixtures, shopping, and more. Also, when it comes to personal loans nowadays, there are many choices available with more lenient requirements.

We no longer live in a day when the only way a person can get a personal loan is by going to a traditional bank or credit union, and the person must have what some refer to as the three C’s- credit, cash, and collateral. Furthermore, we don’t have to worry about the possibility of losing our homes or vehicles when defaulting on these loans. There are negative consequences of negative reporting being on our credit. However, we all can take care of that situation when a short amount of the defaulting on a loan occurs.

There are much more unsecured loans in California available that you can get with fewer requirements, and the process can be quick and easy so you may receive funds into your account in as soon as tomorrow.

Blaine Koehn

Blaine Koehn is a former small business manager, long-time educator, and seasoned consultant. He’s worked in both the public and private sectors while riding the ups-and-downs of self-employment and independent contracting for nearly two decades. His self-published resources have been utilized by thousands of educators as he’s shared his experiences and ideas in workshops across the Midwest. Blaine writes about money management and decision-making for those new to the world of finance or anyone simply sorting through their fiscal options in complicated times.

Your Guide to Personal Loans for Emergency Home Repairs

Posted on June 25, 2019 | by Kevin Strauss | Leave a Comment

As a homeowner, there are times when you will have to carry out emergency home repairs. Whether the repairs are from faulty systems, wear and tear, or natural phenomena, it will be important to figure out where you will get money to finance the works. Personal loans for emergency home repairs are becoming increasingly common and popular. However, you should familiarize yourself with the products and the various options available to you before taking out this type of personal loan.

A good number of consumers do not know where to get a loan when they need extra cash for such an emergency. This is why we make it easy for consumers to not only find a lender but also help them avoid common scams. By facilitating the process of financing home repair services, we help ensure a seamless process and convenient borrowing experience. Here is what borrowers need to know about emergency cash loans for home repairs.

Emergency Home Repair Loans

Sometimes, you may find yourself stranded when your home needs emergency repairs, but you do not have money to pay a contractor to do the job. What most people do not know is that personal loans for emergency home repairs can make for a great way to access the financing you need, allowing you to pay back the loan later over a period.

Emergency home repair loans are one of the many types of personal loans available in the loan market. This type of loan would be ideal in case you do not qualify for other loans if the amount required is too small to take out a home equity or you cannot afford to pay for the emergency home repair yourself. Just as with any other type of personal loan, home repair loans have a fixed interest rate and are paid back in specified installment amounts over a fixed time.

Numerous lenders offer repair loans for emergencies. However, the loan terms vary by the lender. This means that you should not only find the right lender for your circumstances but also understand what you are getting yourself into before making a financial commitment. In short, borrowers have to take time to shop for emergency repair loans and carefully consider the different options available.

How a Personal Loan Works

The period after your home has been affected by destructive events can be characterized by confusion and a feeling of helplessness. This could leave borrowers wondering where to get a loan. However, before taking any step, it would be essential to understand how these personal loans work.

Personal loans are consumer loans that are granted for personal, family, or household use. As installment loans, it means that borrowers borrow a fixed amount of money. And pay it back in monthly installments over the life of the loan. This period will normally range from 12 to 84 months, with the borrower paying back both the principal and accrued interest by the end of the period. The account is usually closed once the loan has been repaid in full.

There are two types of personal loans: unsecured and secured loans. Unsecured loans are not backed by collateral, meaning that the lender will determine whether you qualify for the loan based on your financial history. Secured loans, on the other hand, are backed by collateral. As such, the lender will have the right to claim your asset if you are unable to make your payments.

Personal loans for emergency home repairs are consumer loans meant to carry out repairs after your home has been damaged. In fact, using a personal loan to carry out home repairs is one of the smart ways to use this type of loans. This is because home repairs and improvements will help to increase the value of your property. Similarly, by making your home more functional and comfortable, you will enjoy the peace of mind you need to do other things productively.

Several tools and dollar banknote in pocket.

Common Home Repairs

Home repairs come in different forms. While some make for small projects that you can do yourself, others are larger and will require that you call in a contractor. If you find yourself in need of personal loans for emergency home repairs, you should take time to loan shop to ensure you find the right product for your needs.

Water heater replacement – if your water heater is older than 10 years, there is rust in your faucet water, rumbling and noise or water leaking from the heater, you should consider replacing it.
Roof repair – roof damage can occur as a result of weather damage, damage from trees and power damage, missing or cracked shingles or leaks.
Frozen or broken pipes – decreasing water pressure, water discoloring, and reoccurring leaks are some signs that you may have broken pipes and need emergency home repairs.
Damaged gutters – if you notice broken seams where gutters meet, cracks and leaking or water around the foundation, you should determine whether you need home repairs. You can take personal loans for emergency home repairs to help you cover the costs upfront.
Restore walls and ceilings – discoloration, holes, and dents on walls as well as a buckling ceiling will need to be repaired. If you notice such defects, it could be time to call a contractor.
Replace flooring – you may need to take out emergency cash loans to replace flooring that is stained, chipped, weathered, or has stains from flooding or leaks.

Ways to Finance Emergency Home Repairs

While personal loans for emergency home repairs can help cover these costs, this is not the only way to finance such repairs. Before you start thinking about where to get a loan, you should explore these options to find out if they will work for you.

Homeowners Insurance

Before paying for any home repairs out of your pocket, you should find out if the damage is covered by your home insurance. You may only have to pay the deductible, a factor that will save you a significant amount of money.

Tap Your Equity

How much equity you have in your home may make it possible for you to take out a home equity loan or line of credit. However, you should carefully think about interest charges to determine whether taking this step will be worth the while.

Government Assistance

There is a possibility you will qualify for a program issued by the local Housing Authority. This will depend on your age, location, and income. Homeowners may also be eligible for repair loans and grants offered by the government.

Disaster Relief

If your home suffers damage as a result of a natural disaster, you may be eligible to receive funds from the Red Cross or the Federal Emergency Management Agency. It is important to note that these funds are suppose to cover only small repairs that ensure safety and sanitary living conditions.

Nonprofit Organizations

Depending on the circumstances, there are several nonprofit organizations that may be willing to help home repairs.

Other Options to Consider

In addition to the options mentioned above, there are other alternatives to personal loans for emergency home repairs. Here are some of these options that are available to almost every homeowner.

Before taking out personal loans for emergency home repairs, you should consider the other options available to you. There could be more affordable ways of financing home repairs.

☛Credit cards – you may want to consider financing some of the home repair projects using a credit card. You will be able to save some money if your card has an offer of 0% introductory APR on purchases. This would also be a great way to access the money you need within a short time and without much hassle.
☛Peer-to-peer loans – this is a creative way to raise the money you need to repair your home. Several investors fund a loan by providing a small amount of money to various projects as a way of diversifying risk. Most of these loans have relatively short repayment periods, meaning less interest and allowing you to get out of debt quickly.
☛Alternatives other than loans – there are other ways that you can finance repairs apart from loans. You should consider saving up cash before such emergency repairs become necessary. This effectively means planning for such occurrences in advance. In case your project can be completed in phases, you can pay for the project when you have money for each phase.

Emergency repair loans require that you pay back the money you borrow with interest. Borrowers should have this in mind when applying for the loans.

Factors that Determine Your Eligibility

Even as you shop for a repair loan, it would be important to check the eligibility criteria for most lenders. This will go a long way in helping you to avoid the frustration associated with getting your loan application rejected.

Here are Some of the Factors that Determine Your Eligibility for Personal Loans for Emergency Home Repairs

Your income – lenders will only be willing to make loans to borrowers who can pay them back. Depending on how much you are looking to borrow, the lender will consider your income to determine whether you can afford the loan. Borrowers are more likely to be approved for a loan if the payments are a small portion of what they earn.
Your employment history – since most people get their income from employment, most lenders will want to know if your work situation is stable. Borrowers with steady employment will find it easier to access the funding they need to repair their home.
Other debts you owe – apart from income, the number and amount of debts you owe will affect your likelihood to pay back. It may be difficult for lenders to give you another loan if you are already drowning in debt.
The loans you have applied for recently – lenders consider you to be a high-risk borrower if you have several loan applications over a short period in the recent past. Going on a borrowing spree is one of the signs of a possible default.
Collateral – in case some of these factors make it difficult for you to qualify for a loan, some lenders may consider offering you a secured personal loan. If you have collateral to guarantee the loan, you may increase your chances of getting an approval for the loan.

Another factor that will play an important part in determining whether you qualify for these loans is your credit score. It is important to have a good credit score to increase your chances of qualifying for a loan as well as accessing higher limits.

Best Ways to Qualify for a Personal Loan

Every borrower will want to increase their chances of getting approved for personal loans for emergency home repairs. Here are some of the best ways to qualify for loans.

✓Ensure your credit is in good shape – your credit score and history is what lenders rely on to establish your financial habits and borrowing behavior. Since emergency home repairs are usually unexpected, you should prepare for such incidences by improving your credit score early enough.
✓Reduce your debt as much as you can – your debt-to-income ratio, as well as the amount of debt you owe, will determine whether you qualify for a personal loan. To increase your chances of qualifying for these loans, you should try to reduce your debts as much as you can.
✓Consider a co-signer – in case you have a low income or poor credit score, getting a cosigner with a higher income, and better credit score will increase your chances of getting a loan. By agreeing to be your co-signer, the person agrees to pay the loan in case you default, reducing the risk to the lender.
✓Personal loan shopping – shopping around for loans will help you know where to get a loan. Such information will help you identify lenders with flexible requirements and loan terms.

Why Consider a Personal Loan for Home Repairs?

There are many reasons why you should apply for and take out personal loans for emergency home repairs. Considering that events that lead to emergency repairs occur unexpectedly, these loans allow you to start repair works immediately. Defects in your house can greatly compromise the functionality of your home. With home repair loans, you will have the money to cover the costs upfront and payback in installments that are spread out over time. Compared to credit card loans, personal loans for emergency home repairs have a lower interest rate. This means that the cost of borrowing will not be as high, allowing you to pay back the loan comfortably without much strain. These financial products can also help you make repairs conveniently and affordable.

Home repair loans are a type of personal loan. As such, the loans require that borrowers pay fixed monthly installments over a specified period. With such an arrangement, borrowers will be in a better position to plan their finances and make payments on time. Another reason to get a home repairs loan is that it allows you to access a considerable amount of money. Most lenders will actually offer the amount you need to ensure that you complete your project. It would be important to find out how much you will get from each lender when looking for where to get a loan.

Factors to Consider Before Taking Out the Loan

There are several factors that borrowers should consider before taking out these loans. This will help them to find the right loan for their needs. And to understand the financial commitment they are making as they take the loan.

Find the right lender – the importance of finding the right lender cannot be emphasized enough. As you shop personal loans, take time to go through the terms of the lender to avoid making common mistakes.
Interest rates – different lenders have different interest rates for their home repair loans. You should remember to compare interest rates from several lenders to ensure that you take out the most affordable loan.
Fees – just as with interest rates, the fees charged on the loan will directly affect the cost of borrowing. Make sure you find out whether there are any hidden loan fees and charges.
Loan term – how much time you will have to pay back the loan will be an important factor to consider. This will determine how comfortable you will be able to service the loan.
The amount you need – the amount you need to carry out repairs should guide you on how much you should borrow. The loan amount will, in turn, affect how much you will pay in interest as well as determine whether you will get your application approved.
Your ability to repair – most borrowers take out loans once they find out they qualify without taking time to evaluate their ability to repay. Ensure that you will be in a position to pay back the loan without financial strains that could result in frustration.

An interior view of a house attic under construction.

Disadvantages of Personal Loans for Emergency Home Repairs

For all the advantages associated with personal loans for emergency home repairs, they are not without some disadvantages. Knowledge of the downsides of these loans will help you decide whether you need to borrow money.

Every time a borrower applies for and takes out a repair loan, it shows on their credit report. Too many applications over a short period will make a borrower less attractive to lenders, making it harder to access loans in the future.

Any rejections will also show on your credit report, a factor that could damage your credit score. It is important to not only check your score before submitting your application but also take the necessary steps to boost a weak score.

Just like any other personal loan, late or missed payments on these loans will hurt your credit score. It is critical to ensure that you can afford the loan before approaching lenders to funds to finance home repairs.

In case you have a poor credit score, there is a good chance you will pay very high-interest rates. Financial experts advise borrowers to resist the urge to apply for these loans in case the lender’s interest rates are too high.

How to Use a Home Repairs Loan Wisely

While emergency loans can help you meet your financial needs, they can also land you in a lot of financial trouble if not used correctly. Borrowers should ensure that the money borrowed is used in the way it was intended.

Before you take out personal loans for emergency home repairs, it is important to know the specific types of repairs you would like to do. You should consider listing the repairs down, before working with your contractor to estimate the cost of each of the repairs. This will help you to determine how much you need for the project. Once you have received the funds in your bank account, you must ensure that you stick to the plan. All the money meant for home repairs should be used for that purpose without diverting it to other activities. By doing this, you will benefit from the loan in terms of restoring your home to its rightful condition and increasing its value.

Choosing the Right Lender

In addition to choosing the best personal loans for emergency home repairs, borrowers should also pick the right lender for their needs. Below are some of the ways to identify a good lender with whom to work.

Recommendations from friends and family – friends, family, and colleagues who have taken out these loans before can help you to identify reliable lenders. Based on their experiences, you will be able to gather information relating to the terms of different lenders. Some may also suggest lenders who offer tailored loan products to consumers.
Loan brokers and aggregators – the process of looking for the right lender can be tedious and time-consuming. Working with experienced loan brokers and aggregators will make your work easier. You will not only save time but will also get a list of potential lenders with whom you can work.
Doing research – one of the best ways to find a lender is to shop for personal loans. Today, it is possible to use the internet to access reviews from former customers. And also learn more about different lenders. There are also third parties that can help borrowers to identify reliable lenders. We make it easy for consumers to find reliable lenders who give personal loans for emergency home repairs.

Conclusion

Lastly, borrowers should remember that they have the responsibility to pay back their personal loans. This requires that they not only make sure that they can afford to make payments but also that they put in place measures to see to it that all payments are prompt.

With this information, borrowers will not only know where to get a repair loan but will also be in a better position to make informed decisions. Taking the best personal loans for emergency home repairs can help borrowers to enhance the functionality of their homes. To ensure that the funds help to meet the set goals, it would be important to do some research. One of the best ways to achieve this is through a third party that is not a lender, but helps you find one. We strive to help consumers to find reliable lenders easily and avoid falling prey to scams. Work with us to improve your borrowing experience and find a home repair loan that might meet your needs.

Kevin Strauss

Kevin Strauss is a personal finance writer and homeowner based in the Los Angeles area. Being in one of the most expensive markets in the country, he’s learned to maximize resources to plan for both his monthly expenses and future financial needs. Kevin has a passion for helping those in a similar situation navigate the complex world of personal finance so they can pay down debt, plan for the future and live out their dreams. In addition to covering personal finance in depth on Loanry.com, Cashry.com, Debtry.com, Budgetry.com, Billry.com, Creditry.com and Taxry.com. Kevin shares his expertise with readers who want to create budget-friendly habits across the web.