Unsecured Loans to Improve Credit

Whether you’re unhappy with your current credit rating, or you simply wish to improve your score before you need it, there are a variety of methods at your disposal to beef up your credit. Using unsecured loans is a way to prove your credit worthiness and build a solid lending relationship. Of course, this strategy can backfire on you if your use of personal loans doesn’t follow disciplined guidelines.

Basics of Unsecured Loans

Unsecured loans can come in a variety of forms, but they all share the commonality of not requiring you to put up collateral. To a degree, this is a riskier transaction for your lender because they get nothing in return if you decide to default on your financial obligation to them. For this reason, interest rates on unsecured personal loans are higher than you’d receive for an auto loan. Loan amounts may also be smaller and come with shortened repayment periods.

How to Use Unsecured Loans

Because of the risk to lenders associated with unsecured loans, proving you can repay even a small $5,000 personal loan will begin establishing your good payment history. If you always make your payments on time, this small loan can boost your credit score and win you lower rates when you apply for another loan. As long as you have sufficient income and room in your budget, you can repeat this process of obtaining and paying off personal loans as many times as you like.

How Not to Use Unsecured Loans

Worse than having no credit is using unsecured loans to prove lenders cannot trust you with extensions of credit. Before you apply for any personal loans or lines of credit, always take the time to consider your financial position, and whether you can afford the payments over the life of the loan. If you have any doubts about your ability to repay the debt, do not apply.

Another pitfall some borrowers fall trap to is applying for too many unsecured loans at once. When it comes to your credit score, more does not always mean better. In fact, credit bureaus can take your sudden interest in personal loans to mean you’re about to go on a spending spree and overextend yourself. Along the same lines, avoid applying for addition unsecured personal loans when you already have one or two outstanding. Again, having too much available credit makes credit agencies and lenders wonder about your true intentions.

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Understanding Personal Loan Lenders

The first step to getting the loan you need is finding a lender. Personal loan lenders work in a variety of locations, offering a multitude of lending products. Even though some lenders specialize in a particular type of loan, they can still offer options outside their area of specialty and expertise to fit your needs. Learn about your lender options before making a decision and evaluate which is best for you.

Financial Institutions

Banks and credit unions are the most well known personal loan lenders in the industry. They operate on both sides of the balance sheet, taking in deposits from customers and lending money to borrowers. Although all lenders must meet government regulations concerning lending practices, large national institutions typically have more policies and procedures in place to govern employee behavior. The person you give your application to is rarely the one who makes the decision about extending credit to you. On the other hand, smaller financial institutions may allow you to walk in, make your case to the loan officer and walk out with a check in hand.

Financial institutions typically specialize in unsecured personal loans, lines of credit, credit cards and auto loans. Depending on your state's laws, your bank may also offer a wide array of home equity lending options.

Payday Loan Companies

Payday loan companies have a more restricted product set than the traditional financial institution. This company's bread and butter is the payday advance loan used to provide borrowers extra cash in between paydays. Some offer car title loans and revolving credit lines, but this varies by business and does not usually offer favorable rates for borrowers with exceptional credit. Conversely, the underwriting guidelines may be somewhat less stringent than those of your bank, making payday loan lenders ideal for individuals with spotty credit histories.

Online Lenders

The only difference between most online personal loan lenders and conventional banks is that you can handle everything from the comfort of your home. While you lose the ability to speak with your loan officer in person, you may gain lower interest rates. Online lenders can do this by keeping their overhead lower than your typical brick and mortar establishment. The only word caution when getting a loan online is to thoroughly research the company before providing any personal information. If you can't determine their legitimacy, use a different lender.

This is not an exhaustive list of personal loan lenders, just a starting place for your research. For more complex lending needs, you may benefit from visiting with your mortgage representative or investment advisor, as these types of businesses offer limited loan options.

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Understanding Personal Credit Loans

The appropriate use of credit is an important skill for consumers to master in their financial lives. Using personal credit loans is about more than getting the cash you need, it’s also about repaying the money in a responsible manner. To understand personal loans fully, you must know the affect each has on you in addition to the loan’s terms and conditions.

Personal Loans and Credit

The relationship between personal loans and your credit score does not end after you receive the loan. Lenders have the right to report their experiences with you to the credit bureaus and they take regular advantage of this. If you follow the terms of your lending agreements and repay your personal credit loans accordingly, you won’t have any problems. On the other hand, mishandling your finances and defaulting on your credit obligations carries consequences.

To maintain good credit, avoid three common traps.

Relying on the Grace Period

Some personal credit loans provide leeway for payments in the form of grace periods. This helps you to avoid the late fee if your check takes an extra day in the mail or is in transit during a postal holiday. Loan grace periods are good things, unless you take advantage of them.

For example, if your mortgage payment is due on the 1st and late on the 16th, you have 15 extra days to get the payment to the lender. This helps you protect your good credit rating in the event your check is slow to clear at the bank. This grace period hurts you when you view the 16th of each month as your due date because you no longer have any leeway. If anything happens to delay your payment at the middle of the month, you risk a negative credit report and a late fee.

Missing Payments

It happens to everyone at some point. You receive the bill and you have enough money to pay it, but you still have plenty of time before the due date, so you set it aside. Weeks pass and you get a notice of non-payment because you forgot to go back and pay the bill. Make a habit of paying your bills when they first arrive or scheduling automatic payments. One missed payment on your credit report isn’t the end of the world, but multiple slow pays will lower your score.

Minimum Payments

If you have personal credit loans that offer minimum payment options, they are just that: the minimum you should pay. Not only will you pay more over the life of the loan by making minimum payments, your credit suffers as a result. Resolve to pay more than the minimum amount due on every account each month.

As long as you avoid the common traps, you can use personal credit loans as tools to improve your credit rating while financing the things you need.

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Understanding Financial Loans

Whether you’re a savvy borrower or this is your first time thinking about taking out a loan, it’s important to understand how financial loans work to make sure you get the best deal. The majority of banks and lending companies operate fairly and in the customer’s best interest, but knowing what they’re up to provides an extra measure of comfort. Rather than learning the ins and outs of the financial industry, brush up on a few key facts.

Why banks lend money

Helping people meet their monetary goals is a secondary benefit to your lender for making financial loans. Although the interest you pay on loans is an expense to you, lending money is a major portion of the income for banks and other financial institutions. Some loans, like mortgages, are more profitable to the lender because of the size and term, but every loan they make constitutes income as long as you fully repay the loan.

Factors to lending decisions

Depending on the institution, you may know the underwriting guidelines or how they decide to extend credit may be a mystery. Every company follows a different set of internal rules when making financial loans, but the basics generally remain the same across the industry. Your credit score is a major player in the decision because past behavior can be an accurate predictor of future actions. If you have a history of paying your bills on time, they have little cause for concern about your ability to make payments.

High credit scores alone do not guarantee approval. Lenders like to see debt service ratios (DSR) adequate to take on the extra payment load. Simply put, your DSR is an expression of how well your income covers your debt payments. You may also hear this called the debt to income ratio. As a rule, ensure your income is at least twice your credit expense to keep this ratio under control.

Important details for you

Obviously, you want the lowest interest rate possible, but there is more to consider when comparing financial loans. What are the fees? Mortgages usually carry application, title, appraisal and origination fees, while some lines of credit charge an annual fee regardless of use. The lowest interest rate is not always the best deal if the fees are high.

Make sure to ask about repayment terms. Some auto dealerships prefer receiving payments weekly or semi-monthly instead of once per month. This often means making a special trip to make payments instead of mailing checks. It’s also wise to find out if a pre-payment penalty exists. While you are free to take the full loan term, you’ll save on total interest costs by paying off the loan early. Penalties for doing so, however, eat into your savings.

Keep in mind that different types of financial loans carry different underwriting guidelines and terms. Always ask your lender to explain anything unfamiliar to you before signing the paperwork and you’ll be in good shape.

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Tips to Compare Personal Loans

Whenever you're in the market for a loan, you should always compare personal loans before making a final decision. Depending on the complexity of your personal loan request, there could be dozens of factors to consider. Or it could come down to who offers the best interest rate. Start with some personal loan basics and expand your comparison criteria from there.

Don't compare apples to elephants

Before you compare personal loans, make sure you're looking at comparable options. A loan and line of credit function in very different ways. If you must decide between two such dissimilar options, find a way to level the playing field, then make comparisons.

For example, a personal loan typically offers a fixed monthly payment, while a personal line of credit's payment will fluctuate based on the current interest rate and total amount advanced. For loan comparison purposes, assume you've advanced the full amount of the line of credit at the highest interested rate allowed in the contract. As long as that payment—the highest it can be—is comfortable, you can consider the line of credit to be a viable option. Just don't forget to compare application fees, annual fees and other contract features.

Don't stop comparing at the interest rate

Always read all the terms and conditions when you compare personal loans. The interest rate defines your total cost to borrow the funds, not whether it's the best deal available. Other personal loan features can make it well worth accepting a higher interest rate. These features include:

• The lender reports to the credit bureaus. If one lender doesn't report good payment history then you aren't helping improve your credit score with this personal loan.
• The lender packages products. Borrowing money where you bank is a smart idea if you can take advantage of packaged accounts. For instance, letting your loan balance count towards your total relationship balance with a financial institution can qualify you for a myriad of money-saving options. In particular, find out if your bank offers higher savings account rates, reduced fee stock trades or free checks as a result.
• The lender has convenient payment options. There is a definite benefit to not having to race to the bank monthly to pay your bill. Whether the company offers automatic payment is a good factor to consider when you compare personal loans, but expand your thinking on this one. If you don't like anyone drafting money out of your account, consider the convenience of the bank you pass on the way home each day or that operates a branch in your office building.

It's a sound financial practice to always compare personal loans before you sign on the dotted line to make sure you get the best possible loan for your needs. Make sure to always take into account the usual suspects of payment and rate, then compare any perks available.

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Tips for Online Loans

When you need money, scheduling an appointment with your local banker is not always a convenient option. Online loans provide convenience brick and mortar banks lack, but come with a new set of concerns. The anonymity of the internet coupled with the sheer volume of online lenders makes cyberspace a breeding ground for financial scams.

Finding an Online Lender

Locating a credible company to process your loan is the first order of business. The kind of loan you desire may focus your search for online loans into a particular area. If not, you can follow a few basic strategies to find a lender and verify their credibility.

• Visit popular banking sites. Most of the national banks and credit unions have online lending departments ready to meet your needs. Look for a link to the company’s online loan application on the site. Major banks may not offer rates as low as smaller competitor sites, but you gain the peace of mind in knowing this company’s reputation and financial stability.
• Search for a physical address. Although they do business online, there must be a physical office where underwriters and loan processors work. Even if you’re working with a broker that outsources most of the operation, he has to physically be somewhere. If you cannot locate an address for a company, move to another lender.
• Check for complaints. This does not have to be a drawn out process. A quick search of the Better Business Bureau or your state’s Attorney General will reveal if the company uses questionable lending practices. If nothing else, enter the company’s name into your favorite search engine to see if disgruntled posts appear.

Working with Online Lenders

With in-person loans, getting information to your lender is a straightforward process because you can drop off anything she requests. With online loans, you must rely upon technology.

• Fax machines. If your lender requires paystubs or tax returns, ask about the safety of the fax machine. Is it in a secure location or unattended in the middle of a large office? Although the majority of company employees wouldn’t do anything with your personal information, only send to fax machines where you know your lender will immediately get your documentation.
• Email documentation. When you have access to a scanner to upload your signed documents to your computer for emailing, always use this option. It’s easier to confirm receipt and there is less risk of interception.
• Mailing documents. Putting your loan documents into the mail is the worst option of the three, but some lenders will insist upon receiving original signed loan documents. Never send your documents through regular mail. Instead, use certified mail or a courier company so you can track delivery.

As long as you take the time to verify the legitimacy of your lender, online loans are a fast and convenient way to get the money you need.

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Small Loans for Debt Consolidation

If your credit card balances reach astounding heights, wanting a single payment at a lower overall interest rate is a natural desire. Although your bank may not be willing to offer you enough to pay off everything, consider how you can best leverage the small loans you can get. It’s a slower process, but paying off cards snowballs as you knock out your balances, making a bigger dent in the total number.

For example, if your total credit card debt is $25,000 with an average interest rate of 18 percent, taking a bank loan at 10 percent will almost cut your interest payments in half. In this situation, the lender offers a loan of $5,000, well under the amount you need. You have the option of turning this down; however, consider what you can accomplish with this relatively small loan.

You have three main options for the money.

Highest Interest Rate Approach

When your average interest rate is 18 percent, this means you pay rates much higher than that. List out your credit card interest rates and order them from highest to lowest. Starting at the top of the list, pay off as many cards as you can with the $5,000 loan. Yes, you’ll still owe $20,000 in credit card debt in addition to the $5,000 bank loan, but your average interest rate for the money should drop from 18 percent as a result. This means you’re paying more each month towards your principle balances than you were before you started using small loans. Paying less interest is a good thing.

Smallest Balance Approach

Depending on your financial situation, you may find that your $25,000 debt is scattered among 10 credit cards, making unreasonable demands on your monthly bill paying time. List your credit card balances from smallest to largest and see how many cards you pay in full before the $5,000 runs out. You may not save on interest as a result of this method and your overall credit payment amount may not go down, but you will save time by no longer writing as many checks or making as many online payments each month.

Largest Payment Approach

If cutting your monthly payments is your goal, using small loans can help. Determine which credit card has the highest monthly payment and apply the $5,000 loan to it. It doesn’t matter what the interest rate is or if you can pay off the full amount. Just pay it. As long as the payments fluctuate with your balance, the monthly payment will feature a decrease at your next statement.

Before using small loans for debt consolidation, perform your own calculations to make sure you’re using the consolidation approach that works best for you. If a consolidation loan won’t help your financial situation with the lower loan amount, pass.

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Signs of Bad Personal Loans

For the most part, lending companies are honest business ventures seeking to make a profit from providing loans to customers in need of the product. Although some lenders charge higher fees than you wish to pay, they are still legitimate entities. Unfortunately, not every lender behaves in an ethical manner and borrowers may not recognize the signs of bad personal loans until after they close the deal.

Spam Marketing Techniques

Unless you have an amazing spam filter on your email accounts, you’ll receive credit offers in your inbox at some point. When you’re in need of extra money and you find a guaranteed approval offer when you log in, it seems almost meant to be. That’s what the lender wants you to think. Out of the thousands of people they sent that message to, they hope a decent percentage will accept their terms.

Some of these spammers are out for your personal information so they can steal your identity. Other spammers want you to apply for their loan that charges loan shark rates. Either way, it’s smart to avoid working with companies who are too eager to seek you out. Quality lenders gain business through proven marketing efforts; bad personal loans use shady methods.

Pushy Sales Approach

Lenders like to impart a sense of urgency on their potential customers to make the sale. If they let you walk out of the office, they risk you finding a different lender and losing the loan sale. When your lender presses you to submit the application right then, it’s not a warning sign of bad personal loans; it’s a standard technique to make the sale.

On the other hand, you know the difference between someone trying to make a sale and someone trying to intimidate you to get what they want, in this case, the loan application. No matter how rough your credit history may be, your lender should never talk down to you because of it. Making threats about how you won’t get a loan anywhere if you don’t accept this one is also unacceptable behavior. If you’re in this situation, walk away. Using these tactics to win your business can only mean things will quickly deteriorate after you close the loan.

Avoiding Bad Personal Loans

While there is no magic formula to avoid bad personal loans, you can contact the Better Business Bureau to find out if other customers report shady behavior from a lender. Doing a bit of simple research on the lender’s website is also a good idea. If you can’t find an address and phone number for online lenders, but you do find a site riddled with typos, broken links and missing web pages, continue your search for a reputable lender.

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Secured Personal Loan Considerations

Among the most common types of loans is the secured personal loan. This loan can range from the simple to understand auto deal to a complicated borrowing arrangement with your life insurance company. Although every loan and lender works a little different from the rest, there are basic elements and considerations among secured loans.

Collateral Considerations

What sets a secured personal loan apart from unsecured lending options is the collateral requirement. Collateral is merely something you offer to the lender in exchange for the loan, providing an extra level of assurance that you intend to repay your full loan amount as specified in the lending agreement. This is an attractive option to borrowers who need more money than they could otherwise qualify for without collateral.

Using something as collateral is not a decision you should reach without careful thought. In the case of a car you own free and clear, offering it as collateral can drastically change your insurance expense. Once a lender accepts a vehicle as loan security, you often must maintain full coverage insurance on it for the life of the loan. Unless you already use this coverage option instead of carrying liability insurance, you could see additional premiums of hundreds of dollars a year as a result.

When you use stock certificates as collateral, you lose the freedom to trade your investment as freely as you once could. When the market dips, you may even receive a call that a portion of your loan is now immediately due because of the collateral’s decreased value.

Special Factors

Secured personal loan lenders are selective about the kinds of collateral they accept. This adds protection to the lender that they will not end up with a worthless item in the event you default on your loan payments. This also means you must do more research when shopping rates if your collateral is unusual or rare.

For instance, even though high-end sports cars typically hold their value well if you keep up with scheduled maintenance, not every lender will provide a loan using this vehicle as collateral. Those that do may charge higher interest rates because this is a special luxury item. The same holds true for a secured personal loan using rare coins, valuable artwork or jewelry as collateral.

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Secured Loans

In the realm of lending, there are two primary types of loans: unsecured loans and secured loans. As the names imply, either you sign and take the money or you provide the lender more than your personal guarantee to repay. Before you decide which way to go, know that there is more involved than simply making the lender feel safe in their lending decision.

Basics of secured loans

Banks like making secured loans because there is less risk to them. The item you use to guarantee the loan is called collateral. As a rule, lenders expect the collateral’s value to exceed the amount of the loan for the term of the loan. This is why auto secured loans require you carry full coverage insurance on the vehicle for the life of your note. They want to ensure they receive their money even if something happens to the car.

While it is not always the case, secured loan rates are typically lower than unsecured loan rates. Again, this is a function of the decreased risk to the lender being passed along to you in the form of savings.

Kinds of secured loans

Mortgages and auto loans are the two most common kinds of secured loans, but any loan offering collateral in exchange for the funds is a secured loan. Some lenders accept stock certificates, retirement accounts and even insurance policies as collateral as long as your plan or policy does not specifically prohibit it. You can also secure a personal loan for business purposes with business equipment because it has a tangible value attached to it.

Jewelry, artwork and rare coins are less common collateral options, but options nonetheless.

What happens in default

As with any lending obligation, there are consequences for failure to repay secured loans. In addition to the default showing up on your credit report and adversely affecting your credit score, foreclosure or repossession can occur. If, for example, you used your truck to secure your loan and stop making payments, the truck is legally property of the lender. You receive notice to surrender the vehicle, but if you don’t comply within a specified amount of time, someone will come to take the vehicle from you. In the case of home foreclosure, you must vacate the premises within a certain period of time or your things are placed on the lawn and locks are changed.

Only you can determine if secured loans are the best option for your financial needs when choice exists. So long as you understand the rules going in and make your payments on time, using collateral to secure your loan can save you hundreds or thousands of dollars over the life of the loan compared to using unsecured loans.

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Repaying Personal Loans

The lending agreement usually specifies the terms for repaying personal loans. As long as you follow this and never pay less, you’ll be fine, but there are times when paying the loan off early has advantages. Other times, it doesn’t make sense to do so. Determining when you should make extra payments can help your credit score and your wallet.

Revolving Personal Loans

The most common type of revolving personal loan is the credit card. As you know, the easy use of this type of credit can cause financial ruin when you don’t pay close attention to how often you pay with plastic. You may also know that making the required minimum payments can mean paying on these personal loans for decades.

To combat the power of compound interest, it always makes sense to make additional payments to your credit cards when you can afford to do so. When the debt you carry on your cards is relatively low, you can look at other kinds of personal loans first for early repayment if you wish. In general, your interest rate on revolving credit will be higher than other loans, so deciding to pay extra towards these accounts is an easy choice.

Fixed Personal Loans

Before you consider paying extra on your fixed-rate personal loans, be sure you review your lending agreement first. Is there a penalty for early prepayment? If so, you’ll need to calculate how much money you’ll save in interest charges by paying off your loan early. When your savings exceeds the penalty, you can start making those extra payments. Conversely, divert your extra cash to another loan or your savings when the penalty is more than you’d save. When the difference is marginal, consider what you could make my putting that money in your retirement account as an alternative.

Auto loans are a special case in the world of fixed-rate personal loans. Even when the amount of money you’ll save with an early payoff is marginal, it may still be to your advantage. Check with you insurance company to determine if your premium will decrease once you own the vehicle free and clear or if there are any coverage types you can drop at that time. The money you’ll save may surprise you.

Special Personal Loans

Some personal loans offer special advantages for carrying a loan balance. In these cases, you must decide if the money you’ll save in interest charges is worth losing the perk. For example, some financial institutions will offer a discounted package of banking and investment products as long as your lending relationship meets a specific dollar threshold. Mortgages and home equity loans allow you the potential of deducting the interest at tax time. In these cases, consider meeting with your banker or tax professional to discuss the consequences of repaying your personal loans early.

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Personal Student Loans

Attending college is an important goal shared by many high school students and adults, but paying for the high costs of a college education can be a financial hardship for many families. Federal loan and grant programs are available to help cover the cost, but you may find the need for personal student loans to pick up a portion of school expenses. As a part of the private student loan industry, you should not take out a personal student loan until you understand how it differs from a federal student loan.

A federal student loan requires completion of the Free Application for Federal Student Aid (FAFSA) to qualify for loan and grant money. Rather than using credit history like a traditional loan, the government uses a formula to determine how much they expect your family to contribute to your education. Based on the amount of the contribution, you receive grants, subsidized loans or unsubsidized loans. The only difference between the two loans is that the government makes your interest payments on a subsidized student loan while you’re in school.

Personal student loans are more similar to standard personal loans in that they look at your credit to determine approval. In most cases, you must have a good credit score in order to qualify on your own. Otherwise, you must have a co-signer with good credit to obtain the loan. In some cases, personal student loan lenders will consider you for approval when you have a limited credit history.

Unlike federal student loans that allow you to defer your payments until after graduation, personal student loans require you to make payments as soon as you receive the money. Unless you’re able to hold a job while attending college classes, obtaining a personal student loan isn’t a viable option for you.

Although both kinds of student loans require you to stay enrolled in school at least half-time, interest rates vary. The federal student loan locks in a low rate of interest while you attend school and adjusts to a higher rate after graduation. In both cases, your interest rate is still lower than unsecured personal loans. Conversely, a personal student loan carries a variable interest rate, meaning the rate can and does change based on your contract terms. This makes budgeting for your monthly payments difficult, if not impossible.

Personal student loans exist to help students cover college expenses when federal aid is not enough, but always seek federal student loans, grants and scholarships before utilizing this option.

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Personal Payday Loans and You

Personal payday loans can be a viable source of fast cash when you need it most. Unfortunately, these loans can lead to your financial downfall if you do not borrow in a responsible manner. As long as you understand the risks and features of this type of loan, you can make an informed decision without fear of negative consequences.

Features of Personal Payday Loans

When you need a relatively small amount of money to get you through until your next paycheck, personal payday loans can seem like the best options. Unlike a traditional bank loan, payday loans require very little documentation from you and are fast to close. In most cases, you can walk into a payday loan company with your most recent paystub and walk out with your cash as soon as the lender verifies you have an open checking account.

Personal payday loans make it easy to repay your debt. Rather than assigning you monthly payments and giving you a coupon book, the lender takes care of everything. You write a check for the full amount of the loan plus lending fee and the lender deposits your check on your next payday, paying off your loan in full. You can also pay with cash on your due date or take out a new loan.

Risks of Personal Payday Loans

Rather than using personal payday loans to bridge the financial gap during an emergency, some borrowers fall into the trap of taking out multiple payday loans. Instead of letting the lender cash their check, they pay the outstanding lending fee and take out a new loan for the same amount. When you do this payday after payday, the fees can add up to what would be an astronomical interest rate.

Smart Use of Personal Payday Loans

Although most payday lenders won’t limit the number of personal payday loans you can take out over an extended period, using this loan as a last resort is a wise policy. Before you visit your lender, consider how you’ll use the money and how long it will take you to repay the loan. If you know it will take months to repay, consider applying for a traditional bank loan or line of credit instead. The interest rate will be lower and most financial institutions report to the credit bureaus after as little as six months.

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Personal Loans with Credit Problems

Taking out personal loans with credit problems in your past can be something of a challenge. If your credit report illustrates that you are not a trustworthy borrower, or if you simply lack a solid credit history, you may to have settle for high interest, tough schedule loans. That said, you can discover solid opportunities for personal loans with credit problems, if you follow smart budgeting advice and make repayment a top priority.

In general, you'll need a copy of your driver's license or other ID and proof that you are gainfully employed. Most ?personal loans with credit problems? suppliers require borrowers to make $1,000 or more every 30 days, but some lenders have lower/higher standards. You also need to be 18 years old or older and have proof of residency.

What are the fees, charges, and interest rates associated with ?personal loans with credit problems? offers? First, take a look at the annual percentage rate, otherwise known as the APR, associated with the opportunity. This rate defines how quickly the loan will ?compound?. In other words, how fast it will increase in size if you do not remit payment. You may also have to pay for the processing of the loan itself and for maintenance fees and insurance coverage.

Not all ?personal loans with credit problems? will come with insurance guarantees, but if you're standing on financially shaky ground, it may not hurt to spring for a little extra coverage. This way, if for what ever reason you run out of financial wherewithal before you pay off the loan, the insurance company may be able to liberate you from all or part of your debt.

You can retire your loan in increments, but remember that bad credit personal loans tend to accrue interest rate charges rapidly. Thus, may want to ?consolidate? your high interest loans into some other kind of creditor account, put the balance onto your credit card, perhaps, to avoid continuing to have to pay those hefty charges.

If you're not particularly organized, it helps to reduce your total number of creditors so that you can manage the paperwork without getting confounded by different interest rate charges, fees, and penalties -- sending one or two checks a month to creditors is a lot easier psychologically than sending out five or six different loan payments.

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Personal Loans for People With Bad Credit

What are some of the restrictions governing personal loans for people with bad credit, and how can indebted individuals leverage unsecured personal loans for smarter financial management? Minimum requirements include the fact that a borrower must be at least 18 years of age and a US resident. In addition, many payday personal loans demand that borrowers make at least $1,000 per month and maintain active checking accounts at reputable banks.

What is considered "bad credit"? A FICO score of 580 or below is definitely a bad credit score. FICO scores of 580 to 619 are considered low scores.

Do you already have an outstanding personal loan? Already having an outstanding bad credit personal loan may impede the approval process. Not all lenders are similarly scrupulous. Some bad credit personal loans require zero documentation of income. These arrangements are called “faxless” bad credit personal loans, and they typically require very little approval time. Unfortunately they come with a steep price in the form of high fees and interest.

How quickly do bad credit personal loans get approved? The fastest ones can deposit money into an account and be accessible within the hour. Other unsecured personal loans offer accessibility within 24 hours. The size of your loan will depend in large part on your monthly income history and application. If you have zero credit and many marks on your record, don't expect to be able to take out a thousand dollars or more without paying incredibly hefty fees.

Are there consumer protections for bad credit borrowers? While companies in the business of providing bad credit personal loans can charge service fees, particularly for rollover payments, they may be limited by state and federal law as to how they may claim funds and under what conditions they may lend out to borrowers.

Small loans cost as much to process as larger ones. One of the reasons these types of personal loans cost so much is that the cost of filing a small loan (in the range of $100 to $500) can be equal to the cost associated with filing a much larger personal loan (on the scale of a home mortgage). Thus, to make a profit, bad credit lenders need to charge higher rates than standard lenders do.

Do your research! Read over the written terms, caveats and clauses of your loan contract carefully, and scour your resources for alternative financing options, so you don't feel pressured to take out a bad credit loan or default on a creditor obligation. The terms in fine print are the most important. And if there is anything in the agreement that you don't understand, be sure to ask for an explanation in writing. Verbal comments, promises, assurances and explanations are non-binding. Even if you can get a bad credit personal loan, it may not be the best answer to your financial problem.

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Personal Loans for Debt Consolidation

Debt has a bad reputation for ruining lives, prompting many to form a debt-free goal. Rather than paying off each credit account individually, consumers favor using personal loans for debt consolidation to cut interest payments. This is a solid debt repayment strategy, unless you fall into the common debt consolidation traps. Using personal loans can alleviate some of the pitfalls, but you must be cognizant of others.

Debt Consolidation Trap #1: Transfer Fees

Some lenders, usually credit card companies, charge balance transfer fees when you consolidate to their product. Using personal loans for debt consolidation is one way around this because personal loan lenders may not charge this kind of fee. Always read your fine print to ensure you don’t rack up unexpected charges. Otherwise, transferring balances to your new lower interest rate will not save you as much money as you thought.

Debt Consolidation Trap #2: Creating New Debt

No one can know exactly what curve balls life has in store, which is the reason so many individuals incur debt in the first place. This fact makes credit cards an attractive safety net to those without ample funds set aside in an emergency savings account. The problem with this plan is that it’s easy to charge cards back up to pre-consolidation levels after you use a personal loan to consolidate debt. If you aren’t careful about changing your spending and saving habits, you’ll end up with the same debt payments you had before, plus the consolidation payment.

Debt Consolidation Trap #3: Consolidation Payments

Lowering your interest rates through debt consolidation loans makes good financial sense when you do the math. It doesn’t, however, always equate to good cash flow sense. Where you once had small payments scattered throughout your month, you now have one large payment due. In some cases, your personal loan payment will exceed what you bring home in a week. If this is the case, you must develop a budget that allows you to save a portion from each paycheck to make your payment. If your lender has the contractual option of raising your interest rate over late payments, you may end up in a worse financial position than you were in before consolidating your debt. Even if they don’t change your interest rate, you’ll pay a substantial amount in late fees and your lender will report a poor payment history to credit bureaus.

As long as you carefully read your lending agreement and are diligent about changing your spending habits, personal loans for debt consolidation purposes will save you money while you whittle away at your debt.

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Personal Loan Rates

Searching for the perfect loan option for you often means comparing the rates of competing lenders. You understand how the interest rate charged affects your payments and know it’s important to find the lowest personal loan rates available. What you may not know is exactly how lenders determine the interest rate they charge to lend you money.

Lenders use the following factors to set personal loan rates:

• Credit history
• Collateral
• Loan type
• Loan terms

Credit History

Reviewing your credit file gives lenders a good idea of how reliable you are to repay the loan. Generally, the closer you are to the perfect credit score of 850, the lower the rates you’ll enjoy as a result. Lenders sometimes tier personal loan rates based on credit score, so if you can maintain a score in the 700s, you should still receive a low rate.

Collateral

It’s no secret that lenders are more willing to take risks by giving loans to individuals with shaky credit when they have collateral. Collateral for a personal loan can be anything from a house to a car to stock certificates. Keep in mind that your collateral must have a tangible resale value in order to be accepted by lenders. Family heirlooms may have sentimental value to you, but banks won’t accept them unless they can be quickly sold for cash.

Loan Type

The type of loan you choose will often play a major role in the lender’s rate. Payday loans, for instance, carry some of the highest personal loan rates in the industry because of their extremely short terms. On the other hand, home equity loans maintain lower rates with possible tax advantages due to the nature of the collateral. If multiple types of loans will suit your purpose, make sure to compare rates between types, as well as lenders.

Loan Terms

The length of time you want to repay the money and your loan amount play a role in the interest rate with many lenders. Although all loans constitute income to financial institutions, they make the bulk of their profit from the larger loans amounts. If you lender uses the loan amount to determine your rate, ask how much more you must borrow to get a rate discount. Also, remember that the longer you take to repay the loan, the riskier it is for your lender that you’ll default on the loan. If you can afford higher payments, you may save on interest by shortening your loan’s term.

Every lender uses a different method to set personal loan rates, but if you remember these four key elements, you can find the lowest possible rate.

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Personal Loan Rate Basics

When you’re ready to apply for a loan, it’s important to know how your lender sets the personal loan rate they offer you. This is not an arbitrary number selected on a whim, but the sum of careful calculations they do concerning the nature of their business and how you fit into it. Knowing how they set the rate can help you to maximize your chances of getting the lowest interest rate possible.

Banking Industry Factors

Sometimes, the personal loan rate your financial institution offers to you has little to do with your creditworthiness. Industry factors play a large role in most service oriented businesses, but this is especially the case with financial companies. When the industry faces uncertain times, you’ll notice it in bank interest rates.

For example, a higher than normal percentage of defaulting mortgages causes a ripple effect through the financial industry because many banks are also in the home loan business. When one business unit takes a loss, the whole company must look for ways to cover these losses before shareholders hold them accountable for a decreasing stock value. Offering loans is the primary way banks make money, so increasing the personal loan rate is their best chance for additional profits until they can sell off their bad assets.

Personal Credit Factors

When market forces are not in play with the personal loan rate, your credit is the single largest factor determining what rate you receive. In general, the higher your credit score, the lower the interest rate on your personal loan. When you wish to obtain the low advertised rate of a lender, remember that good credit is not always enough. Within the fine print, the lender may stipulate the rate requires credit qualification. This can equate to scores hovering near perfect, not just above average.

Loan Amount Factors

If everything in your credit is top notch and the industry as a whole is without scandal, it doesn’t always make immediate sense why you did not get the interest rate you deserve. Rather than reflecting on you, your personal loan rate might be a reflection of the loan amount. It’s no secret that larger loans generate more profit for financial institutions than small dollar deals. You can ask your lender if increasing your loan amount will qualify you for a better interest rate, but know that the bank threshold may be beyond your reach, perhaps as high as $50,000 for a personal unsecured loan. In this case, the offered rate is the best deal for your loan amount.

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Personal Loan Options

If you’re thinking about applying for a personal loan, you have a lot to consider. Under the umbrella of personal loans, you’ll find a variety of loan options, all with individual terms and nuances. Before you apply for any loan, find out about the different types available to you in various situations to determine which is right for you.

“I want a car.”

Getting a personal loan to buy a car is a relatively easy matter. In most cases, you go to the dealership to browse the selection and drive away in your new car with dealer financing. Because dealerships don’t make a dime until the car drives off the lot, they make a wide range of lending options available to customers to expedite the process. Whether you select the standard auto loan, lease or balloon payment option, your auto dealer is not your only lending source.

Banks and credit unions offer vehicle purchase loans, although they do not always advertise the fact. If you have a solid credit history, you can get a personal loan from your financial institution using your new car as collateral. You can also refinance the loan you get at the dealership to your bank at a later time.

“I want a house.”

A mortgage is your best personal loan option for home purchase. Extended terms of 30 years create budget-friendly payments for this hefty purchase. Mortgage lenders determine approval based on your loan size, credit score and income; however, bad credit mortgage options exist if you’re willing to pay higher origination fees and interest rates.

When you want to design and build your house instead of purchasing within a housing community, you’ll need land. Lot loans are special personal loans that allow you to buy your land separate from your builder. You then roll the lot loan into your mortgage when it’s time to close the deal.

“I want to consolidate my debt.”

Debt consolidation is a hot topic among consumers looking for ways out of debt. If your credit is strong, an unsecured personal loan is an option to help lower your interest rate and payments. Homeowners who owe less than their home is worth have an additional option for debt consolidation in the form of home equity loans. Rates are typically lower than unsecured loan rates, but every state has different guidelines for equity lending. Talk to your lender to explore this option.

Every financial institution offers different personal loan products, so it’s smart to talk to multiple lenders about what they offer early in your decision-making process.

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Personal Loan Comparison Tips

Selecting the correct loan to meet your needs is about more than just the rate of interest you pay for the deal. By performing a personal loan comparison on the primary four components of your loan, you can determine which loan is the clear choice for you. Without performing a side-by-side comparison, you risk passing on the personal loans that can save you the most money.

Personal Loan Comparison 1: Interest Rate

Although the interest rate is not the only area you should focus on during your personal loan comparison, it is an appropriate place to start. When you’re considering a short-term loan against a long-term loan, be sure to find out what rate of interest the short-term personal loan charges on an annual basis. Once you do the math on your 90-day loan, you may discover an interest rate in excess of 100 percent. Note this on your comparison and continue your analysis of your loan options.

Personal Loan Comparison 2: Loan Term

In general, higher loan amounts come with longer loan terms. When performing your personal loan comparison, you must keep in mind what your goal is with obtaining the loan. Extended terms on personal loans yield lower monthly payments, but mean paying more in interest over the life of the loan. An extended term can also provide you more flexibility if you plan to use an annual bonus or income tax refund to repay a large portion at once.

Personal Loan Comparison 3: Monthly Payments

Accepting the lowest payment option is a natural reaction, but take a deeper look at the personal loans. Your personal loan comparison will show you why the loan has such a reasonable monthly payment. Low payments because of low interest rates are often a good deal, while low payments due to lengthy terms mean paying more money to the lender. If both personal loans have monthly payments you can afford, consider the loan with the higher payments if the rest of the terms are more favorable.

Personal Loan Comparison 4: Total Interest

For many experienced borrowers, the total interest they pay is of critical concern during the personal loan comparison process. Assuming you never make extra payments or late payments, the amount of interest on the contract is the exact amount you’ll pay. Depending on the term and amount of the personal loan, the interest you pay may exceed the amount you borrow. If cutting the total interest is important to you, seek lenders who do not charge a prepayment penalty, allowing you to pay additional principal on the loan at any time
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Personal Loan Calculator

When you need a loan for something, shopping the variety of options available to you is an important step. You know you want the best rates available and a loan that fits your family’s budget, but you may not know exactly what terms you need. A personal loan calculator is a tool to help you with your decision. As with any computer-based program, your final calculations are only as good as the data you input, so knowing the difference between online calculators is crucial.

Payment Calculator

The most common personal loan calculator available online is used to calculate loan payments. Before you apply for any loan, you should make a habit of performing this calculation. If you don’t, you run the risk of getting a loan with monthly payments you can’t afford.

For example, if you want a personal loan to purchase a car, you must know how much car you can afford. Input a few price points with a variety of interest rates and note how each change affects your payment. Spending $15,000 on a car may not sound unreasonable until you run the payments at a high interest rate of 18 percent. Use findings to shape the nature of your car search to save valuable time.

Interest Rate Calculator

A less common personal loan calculator is for finding interest rates. Use this calculator to determine the highest interest rate you can afford to pay for a loan. Simply input the amount you want to finance, the highest payment you can afford and the number of months to repay the loan. Keep the percentage it provides in mind when shopping for personal loan rates. If a lender cannot offer a rate under your maximum, don’t apply.

Payoff Calculator

The payoff calculator is the most useful of the personal loan calculators for anyone trying to eliminate their debt. This one typically has two different functions. You can enter the data on your current balances, rates and payments to find out how long it will take you to be debt free. Another function of this calculator is handy if you have a debt free timeline. Input your balances, rates and payoff deadline to determine the required monthly payments to meet your goal.

No matter what kind of loan you desire or how many debts you have to repay, using a personal loan calculator can help you make more informed financial decisions.

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Personal Loan Application Tips

Submitting a personal loan application causes apprehension in some people, especially if you have shaky credit or are unsure what’s on your credit report. Even with its polished marble floors and hushed interior, your bank isn’t a scary or foreboding place. Even if you’ve never applied for credit before, you can stride into your bank with confidence and get the money you need.

Know Your Needs

Before you submit a personal loan application, it’s smart to figure out the exact nature of your request. How much do you need? How much can you afford to repay each month? These are questions the lender will likely ask, so be ready to answer. If you can’t, you may end up with too little money to meet your needs or payments you can’t afford.

Shop Around

Your bank decade is a good place to start, but don’t forget about your other options. Check out the offerings of the other banks in town, including those that are small and locally run. Another option for your personal loan application is internet banks. Some have lower overhead because they lack a brick and mortar building and they may pass their saving onto you in the form of lower rates and application fees. Your goal is to find the most money for the lowest cost.

Stay in Control

Lenders learn early in their careers to control the direction of the conversation and get the personal loan application while you’re at the desk. Remember that this is your money and your credit, so you aren’t obligated to apply with any lender simply because you took up time to get the information you need. You decide when and if you’ll apply for a loan.

Also, keep in mind that applying for multiple loans to find the best rate is not a solid strategy. Your credit is pulled each time you apply. If you must apply for more than one loan, narrow down your options to the top two or three lenders and apply with each to minimize the inquiries in your credit file.

Be Prepared

While every lender is different, compile basic information and documentation in a folder to make the personal loan application process easier and less time-consuming. Include your social security number, gross annual or monthly income, paystubs or self-employed tax returns and employer contact information. If you’re using the loan to make a purchase, include the contract showing the purchase price. Depending on how long you’ve been with your company or at your current address, the lender may also need previous employer information or your previous addresses.

Taking the time to research companies and evaluate your needs before submitting a personal loan application allows you to apply only once and still get the best deal available.

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Personal Line of Credit

Sometimes, life throws curveballs when you least expect it, causing a need for extra cash on an ongoing basis. When you find yourself in this situation, applying for a bank loan can help fill the gap, but may not be your best option. Instead, look into a personal line of credit to meet your ongoing needs.

Line of Credit Basics

Unlike a standard loan, a personal line of credit is a lending vehicle that functions much the same as a credit card in the sense you can purchase and make payments up to your credit limit. Don't be fooled into thinking credit cards and credit lines are the same because lines of credit offer additional options to advance you money. That being said, both can fill cash flow gaps when used in a responsible manner.

Your lender approves you for the highest credit limit you qualify for under the lending guidelines. Essentially, a lender assumes you'll max out the line and sets the limit based on what you can afford to repay each month. Once established, you can draw funds from the line of credit and repay the funds based on your needs and cash flow. Because you advance funds over time, most lenders charge a variable interest rate that fluctuates with the Prime rate set monthly by the Federal Reserve Board.

Line of Credit Advantages

The main advantage of a personal line of credit is the ability to decide when and how much you borrow. Lines of credit are ideal for funding projects with undetermined expenses. If you'd used a loan, pay more monthly if you estimate too high. When the opposite is the case, you may be unable to obtain a loan for the additional funds. Using your line of credit allows you to only pay for the portion of the money you use, potentially saving hundreds of dollars in interest charges.

In addition to the flexibility provided, you can take advantage of interest rate decreases as each occurs. Depending on the terms of your personal line of credit contract, your rate may adjust monthly, automatically reducing your payments as interest rates fall.

Line of Credit Disadvantages

Economic instability is the biggest disadvantage of personal lines of credit. In a rising interest rate environment, you risk a hefty increase in interest costs and payments. Your lender may write an interest rate cap into your contract, but this can be several percentage points higher than you're comfortable paying. Regardless of the current interest rates, always consider your ability to repay your credit line at the highest allowable rate before taking the deal.

Overall, a personal line of credit is a decent borrowing option when you need increased flexibility in the way you use your loan proceeds.

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Personal Credit Management Tips

Money management is a skill best learned over time and with the benefit of those little mistakes along the way. While some have an inherent knowledge of personal credit and financial matters, the majority of people stumble from time to time. No matter which end of the spectrum you fall, you can whip your credit and finances into shape with a few simple tips.

Understand your credit report

Figuring you have plenty of time to learn about your credit isn’t the most productive approach. The saying “what you don’t know can’t hurt you” doesn’t apply to your credit score. Pull a free copy of your personal credit report from the credit reporting agencies at least once per year and make a habit of disputing incorrect information. Paying attention to your credit before you need it ensures fewer surprises when you apply for a loan.

Respect your credit usage

If you aren’t in a position to pay off your personal credit card bills each month, that’s ok as long as you plan for it. By now, you’ve already heard that the average credit card takes 30 or 40 years to pay off when you only make the minimum payments. Cash flow doesn’t always come in even batches, so making only the minimum payment on your cards may be necessity. When you know you won’t have the funds to pay the full amount, forgo making frivolous personal credit purchases. Do you really want to pay interest on fancy restaurant dinners for the next several years?

Plan for the future

Building up your savings account is the best way to avoid overextending your use of personal credit options. Create a savings plan that covers the full range of your goals. If you know you’re spending a week in Hawaii next winter, begin saving now to avoid racking up credit card charges. In addition to planned expenditures, save for unexpected emergencies. No one likes calling a professional to deal with a burst pipe, but it’s less of a blow when you can pay with cash instead of credit.

Keep credit accounts current

Devise a system to make sure you don’t forget due dates. It doesn’t matter whether it’s your auto loan, home mortgage or personal credit card bill, failure to pay on time results in late fees, negative credit reporting and potentially increased interest rates as a late payment penalty. Make a habit of paying bills early if you can. Loan companies are often more forgiving of a late payment from a customer with an outstanding payment history.

Keeping your personal credit in shape isn’t hard as long as you’re willing to work with it. A little bit of attention now can save you hundreds or thousands of dollars of frustration in the future.

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Personal Cash Loan Tips

Not every loan must come from a bank or other lending institution. Times exist when a personal cash loan between friends or family members is more appropriate than visiting a brick and mortar business. Unfortunately, mixing money and friendship can be a difficult task, even when a solid relationship is present. Whether you’re borrowing money or lending it, you can minimize the chance of friendship ending loans with five tips.

Written Contract

Borrowing $3,000 from a friend isn’t the same as using his lawn mower. A personal cash loan is a serious financial transaction requiring timely repayment and both parties should treat it as such. Putting all the specifics in writing not only solidifies your commitment to the deal, it allows no room for later disagreement about the exact terms. Make sure you include the loan amount, payments, interest rate – if applicable – and your notarized signatures.

Fair Interest Rate

It’s not just a good idea to offer a fair interest rate on personal cash loans; it’s the law. You can get an idea of the going interest rates for varying loan amounts by visiting lender websites, but keep in mind most banks must follow different rules than individuals. To ensure you aren’t charging a “loan shark” rate, find out the maximum legal rate allowed in your state and stay under it.

Responsible Repayment

Friends are often more forgiving during hard times than lending companies, but that’s no excuse for lax repayment. Treat the personal loan from a friend just as you would an obligation to any other lender. Always strive to make full payments on time, even when your friend tells you take as much time as you need. You don’t want to lose a friend over money.

Responsible Lending

If you plan to lend money to someone, make sure you can afford to be without the funds. Helping someone in his or her financial time of need is a noble deed, but overextending yourself is not the help your friend needs most. When you lend more than you can afford, you may begin asking for repayment every time you see your friend, straining the relationship. On the other hand, offering to help someone using money you don’t immediately need puts less pressure on you and your friendship.

Gauge the Relationship

Before lending money or accepting a personal cash loan from anyone, determine the nature of your relationship. Do you really know each other well enough to enter into a financial arrangement? Do you trust this person to repay the money? Are you comfortable owing money to some you know? If you cannot answer these questions in a positive manner, consider other loan options.

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No Credit Check Personal Loans

No credit check personal loans provide excellent stopgap measures for low income individuals or people with really unfortunate FICO scores. Contrary to what you may have heard in the media about the providers of no credit check personal loans, the truth is that these lenders provide valuable services and timely cash, all without turning out major profits (like pro-mortgage lenders often receive).

That said, the consequences for unattended or poorly attended no credit check personal loans can blossom. Sure, you can use these arrangements to take care of a pressing need -- for instance, you can access money to get your car out of hock so that you can return to work -- but don't rely on them for day to day living expenses. After all, if you are at the point in your financial life where you need no credit check personal loans to move forward, it's likely in your best interest to be as frugal as possible, in other words, don't take on high interest rate debts long-term.

To avoid having to rely on credit check personal loans in the future, you need to pump up your credit score. You can do this in one of several ways. Get a free credit report, and examine all of your marks to locate erroneous creditor comments. Contest these errors, or negotiate down your debts with your creditors.

Even if you do get something bumped off of your credit report, it may take a month or longer to appear. Moreover, the credit bureaus aren't beholden to any consumer protection authority, they are essentially private businesses, so don't count on in-company fact checking to protect you. Explore your credit report, and manage your financial weaknesses using debt counseling, budget rearrangement, and smarter cash flow planning.

The good news about no credit check personal loans is that you can move forward with your pay arrangement rapidly, thus cutting through the red tape that sometimes accompanies traditional, lower rate loans. On top of that, you can qualify for payments of a thousand dollars or more without having to provide much background information, generally, all you need is a proof of address and some piece of information which demonstrates that you earn a thousand dollars or more every month.

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Online Personal Loans

In most cases, getting personal loans is not a difficult task because of the streamlined processes put into place by lenders. Online personal loans offer even more advantages to borrowers than their traditional counterparts. You always retain the option to visit your local bank branch if you prefer, but knowing the reasons why staying in front of your computer to apply will help you make a more informed decision.

More Loan Options

Not every lender provides branch offices with the same loan products offered online. The exact reason behind this is a mystery, but you can take advantage of it all the same. If you look for online personal loans with companies that don’t have local offices, you can increase your available loan options even more.

Applying for an online loan eliminates some of the room for human error. In some cases, you only receive loan options your banker is comfortable presenting. Even though the company may offer personal lines of credit perfect for your needs, a banker without sufficient knowledge may discuss your fixed loan option instead.

More Time Savings

Driving to your lender’s office for the appointment takes time. If you have a longstanding rapport with your lender, you may spend the first 15 minutes of your time together discussing the grandkids or college courses of interest. Building a solid relationship with financial professionals can be an important part of your financial life, but you don’t always have the time to spare when you want to borrow money.

Online loans also alleviate the communication problems present with local loans. When your local lender needs additional information, you might play phone tag for days before you find out the specifics, while an online lender typically emails the exact request with directions for submitting the necessary information. If you have a scanner, you can upload your documents and send everything via email instead of looking for a fax machine.

More Interest Rate Options

Getting online personal loans from companies without local offices can mean you get a lower interest rate. Although this isn’t always the case, lenders without rent and utility expenses can afford to make less on each deal than a brick and mortar institution. Some companies even offer lower rates for using the online loan department because they’ve found their processing center loans are more profitable overall than those originated at the branch level.

Online personal loans are not a good fit for every situation, but if you can forgo a portion of human contact during the lending process, you can receive a number of benefits.

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Need a Fast Personal Loan?

When you need money, you may feel pressure to find it as quickly as possible to avoid missing an opportunity. Before you rush out to apply, it’s wise to take a moment to evaluate why you need a fast personal loan. Although your need can be legitimate, you may discover it’s an impulse decision best ignored.

Think about the purpose

Because you don’t often wake up and decide to borrow money for no reason, every loan has a distinct purpose. With all loans, you should always carefully weigh the costs of financing against the benefits afforded by your purchase, be it a house, car or new business venture. Needing a fast personal loan for a purchase is no reason to forgo this internal thought process.

In this case, the difference is that you must determine whether the abbreviated time constraints make your purchase as worthwhile as you believe. Do you truly need cash fast or do want speed? A difference between the two exists. The former implies you’ll lose the deal, while the latter speaks to your impatience.

Evaluate your options

By nature, some loan options are quicker than other options. For instance, a borrower in Texas who wants a fast personal loan will not benefit from a home equity application because of the extended cooling off and rescission periods. Once you determine a time constraint affects your purchase, consider only those options available within the appropriate amount of time.

Loans requiring collateral generally take longer to complete than unsecured options. In states where equity lending is a speedy process, you still must wait for an acceptable appraisal and title check. When the amount of money you need is relatively small and you can afford to repay it within a few months, a payday loan is perhaps the fastest personal loan available.

Consider the consequences

Just because you find a fast personal loan option does not mean you should take it. Some lenders prey on people who need money now by charging high interest rates and inflated application fees. You also risk overlooking a solid loan option because of your rush. Make it a habit to evaluate all the variables of how a particular loan will affect your life, not just your ability to make your purchase. If you have enough time to sleep on an offer before making your decision, do it. What seems like an emergency in need of finance one day might seem less dire the next.

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Misconceptions of Bank Loans

Even the savviest consumer can fall victim to bad information once in a while. When you hear people talk about bank loans enough, it’s easy to accept what they tell you as fact when it may be little more than opinion. To stay educated on any subject, it’s important to review your facts and assumptions on a regular basis. Finance is no exception to this guideline.

“Banks offer the best rates.”

Once upon a time, this was the case. Borrowers sought out bank loans for all their needs and avoided finance companies as though life itself depended upon it. In the technological times of the World Wide Web, the way you do business and think about borrowing money is no longer the same. Online lenders now claim a large chunk of industry lending dollars.

This does not mean your local bank will never offer the lowest rates for your situation; just that it is not your only affordable option. Not having a local established presence means online lenders must work harder to earn your business. Lower interest rates and waived application fees are the primary tools. Your local bank doesn’t often use these tools because the overhead they pay for the building and staff exceeds that of the online company. Your bank branch also trades on its reputation and stability to justify higher interest rates or fees.

“Banks only lend to people with perfect credit.”

If you avoid your bank in favor of high interest lenders because of a spotty credit history, it’s time to give your bank another look. Financial institutions adjust their credit models on a regular basis to provide better service to the communities they serve. When the average American credit score dips below the level widely acceptable to lenders, they take notice. Although bank loans for people with bad credit will never features rates that rival what they offer to A-credit borrowers, you’ll find people with lower credit scores can now receive loans from the bank.

“Your banker has the final say about the loan.”

To a degree, this is still true of smaller, locally run banks. The national financial institutions often use a central underwriting and processing center to determine whether you receive the loan. Banks do this to keep the process as fair and unbiased as they can. Rather than a loan officer who can approve or deny bank loans on a whim, they employ professional underwriters capable of looking at the facts in your credit file to determine your ability to repay the loan.

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Long Term Personal Loans

When you know you cannot repay the money you want to borrow within a year, long term personal loans are your best option. Unlike alternatives with abbreviated terms, these loans become part of your budget and can affect your credit rating. It’s important to understand the way these personal loans will fit into your life before you submit your loan application.

Long Term Personal Loans and Credit Reporting

Your credit file is nothing more than a compilation of the way you manage your credit. Creditors who offer you long term personal loans will periodically send information about their experience with you to the credit reporting agencies. If you follow the terms of your lending agreement and always make your full payment on time, you have no reason for concern. In fact, your credit score can benefit from this positive lending relationship.

In order to report to the credit bureaus, lenders of long term personal loans typically wait at least six months to collect a fair amount of information on your payment history. Keep in mind, they will notify the credit bureau as soon as they open a new account for you. This activity in and of itself has the power to change your credit score, depending on the size of the loan and how it changes your debt utilization ratio.

Long Term Personal Loans and Budgeting

When you accept a payday advance loan, your expectation is to pay it off from your next paycheck. You might tighten your belt for a few weeks or a month to do so, but the changes are not lasting. Long term personal loans, on the other hand, require careful consideration because these payments span years.

Always start with a review of your household budget. How much money can you afford to spend on loan payments each month? If you determine you cannot afford the size loan you need, look for ways to decrease your spending in other areas, but stay realistic. When your family typically spends $600 each month at the grocery store, it’s unreasonable to sustain a cut of $300 to the family food budget. While this is a logical place to cut spending for a month to cover an emergency, keeping it up over the next several years can cause a hardship.

Before you start looking for long term personal loans, make sure the monthly payment is a good fit in your budget. Getting the car or home of your dreams means little if you lose it for non-payment after a few months.

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Loan Consolidation Programs

When debt spirals beyond your control, it’s natural to look for ways to pay off your balances faster. Loan consolidation programs may come under fire for doing little to decrease the overall debt, but these programs are valuable tools you can use. Before you sign up with any program, it’s smart to learn the about the different types of consolidation programs and what each entails.

What consolidation does not do for you

A loan consolidation program is not a magic financial pill that will erase all your debt in the blink of an eye. If any loan counselor or lender tells you they can do this, run. Although your debt payments will combine into a single monthly payment, your total balance usually stays the same. Your consolidation will also not remove negative information reported about you from your credit report.

How bank consolidation programs work

Applying for a loan consolidation through your bank is the same simple process as it is to apply for any loan. Essentially, you’re looking for one loan to pay off all your existing balances. If your credit history and income is sufficient for your bank’s underwriting guidelines, you might be able to use an unsecured personal loan for your consolidation. Sometimes, using the equity in your home or securing the loan with your car is a better option.

Regardless of which bank loan option you choose, your lender will request current statements for each debt included in the loan. After loan closing, your banker prepares checks for each of your creditors and sends them on your behalf to repay the loans.

How debt management plans work

If you go through a credit repair service or a credit counseling agency, they may not have a loan consolidation program. Instead, they contact each of your creditors to negotiate lower interest rates, fees and payments on your behalf. Once they complete negotiations, you receive a total of what you owe them each month. After you pay into your debt management plan, the agency disburses payments to each creditor and keeps a small percentage as their fee. Qualifying for a debt management plan usually does not require a credit check, making it a viable option for individuals with bad credit.

A loan consolidation program through either a lender or a credit counselor can lower your payments to a manageable level, making it possible for you to pay more towards your credit obligations each month than you could before the consolidation.

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How to Get a Personal Unsecured Loan

You don’t always have collateral to offer your lender in exchange for the loan when you need money. When this happens, a personal unsecured loan is often your best bet. Even if you haven’t applied for unsecured credit in the past, this type of loan is well within your reach.

Pull your credit

Reviewing your credit history is the single most important thing you can do when in the market for a personal unsecured loan. Lenders look at the information within this file to determine if they can do business with you. Your credit score itself is important, but pay attention to the details as well. If you find any erroneous information, contact the credit bureau to correct it.

Define your needs

Not every lender is a good fit for your credit needs, especially when you consider how many different kinds of unsecured personal loans exist. A payday loan lender might be a fast option when you only need a small amount of money for a very short term. On the other hand, you cannot get a payday loan for $15,000 with a repayment term of five years. Knowing what you want from your loan will determine who can help.

Research lenders

Getting a personal unsecured loan is a partnership between you and your lender. Check with your state’s Attorney General or the Better Business Bureau to find out if potential lenders have complaints filed against them. Some complaints may not apply, but pay special attention to clients who talk about harassment from the lender when the payment was late. You have an obligation to repay your loan according to the loan’s terms; however, missing a payment does not allow the loan company to disregard state and federal laws pertaining to account collection procedures.

Compare loan factors

While an important factor to consider with any loan, the interest rate is not the only part of the loan you should check. Does the lender charge an application fee? Is there a prepayment penalty? How long is the loan’s term? If these additional factors are equal between lenders, it is then appropriate to let the interest rate guide you.

Submit your application

If possible, apply to only one lender. Multiple inquiries on your credit file can lower your credit score. Protect your rating by limiting the number of applications you submit while shopping rates.

By following these five simple procedures for getting a personal unsecured loan, you can find a loan that meets your needs and avoid buyer’s remorse after you close the deal.

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How to Find a Loan

Between television, radio and print advertisements, there is no shortage of information on how to find a loan. The problem is sorting through all the hype to get to the financial information you need to choose between loans. Instead of letting the media draw you towards a particular type of loan or a certain lender, develop your own strategy when borrowing money.

Step 1: Determine your needs

You wouldn’t go to a mortgage representative to find a loan for vehicle purchase, so defining the scope of your needs is crucial to successful borrowing. Why are you borrowing money? How much will it cost? Knowing the answers to these two questions will focus your search in on lenders who can provide what you desire.

Step 2: Look for experts

Ignore comical television commercials and turn your attention to the recognized experts in the lending industry. Payday loan companies handle cash advance loans better than any other lender, just as home mortgage representatives are experts at obtaining affordable mortgage products. Going to a company or individual with a high level of professional experience in what you need ensures a smoother loan process.

Step 3: Find a generalist

When no clear-cut expert exists for the loan you desire, you can find a loan Jack-of-All-Trades to assist you. Your bank or credit union is a logical place to start. Financial institutions offer a wide array of lending products to fit a variety of needs. If your financial institution is unable to assist you, they often have a list of partner companies they know can fulfill your lending needs at a fair interest rate.

Step 4: Ask a friend

Finding a loan doesn’t need to be a solo endeavor. Find out if family or friends recently obtained a similar personal loan. If so, obtaining a referral from a trusted source gives you the peace of mind that you will not only find the right loan, but a reliable lender. A good habit to get into is to always ask friends for the business cards of those who provided exceptional service. Even if you don’t need the service at the time, you’ll have a source of potential vendors when you’re ready.

Although there’s nothing wrong with using media advertisements to find a loan, make sure you do your own independent research on the loan type and lender in order to get what you need.

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How to Compare Loans

Finding a reputable lender is not your only concern before submitting a loan application. Make sure to compare loans carefully before you sign on the dotted line. Even within the same company, you may find that a different lending product better meets your needs.

Look at terms

To compare loans, you must understand the nuances of the terms. Is your rate fixed or variable? Can payments ever increase? Are you providing collateral or only a signature? Ask your lender to prepare a document with all the relevant information for the various loan products that fit your situation and start with these questions.

For instance, using a fully paid vehicle for collateral carries an additional cost as a result. Unless you already maintain full coverage insurance on the car, your insurance premium increases. This increase may eliminate the interest rate savings you gain by not using an unsecured personal loan product. Always think through the seemingly unrelated details affected by your loan choice to make sure you get the best loan possible.

Calculate savings

Introductory rates offered by financial institutions are tempting and effective ways to get you in the door. Read the fine print on the offer and do the math when you compare loans to see if the deal is as good as it looks. You may find a loan with a slightly higher rate is the better option.

Let’s say you have two loan offers to compare for a term of four years. Lender A is offering $10,000 at a flat rate of five percent, while Lender B offers $10,000 at an introductory rate of zero percent for one year and a go to rate of 10 percent. Paying no interest upfront sounds like a good deal, but what do the numbers say?

Using a simple interest calculation, Lender A charges $500 in interest for the funds. Lender B, on the other hand, receives an average interest rate of 7.5 percent, which equates to an interest cost of $750. Depending on the interest calculation method your lender uses, these numbers will vary. Always find out the total interest cost assuming no early prepayment and compare those figures in addition to interest rates and payments.

Think about benefits

Another factor when you compare loans is whether it offers additional benefits beyond the borrowed money. Mortgages, home equity loans and home equity lines of credit offer a potential tax savings on your income taxes for interest paid. Always consult your tax advisor before assuming you qualify for the deduction, but if you do, know that these tax savings can make a tax advantaged loan product more attractive than a regular personal loan.

Learning how to compare loans doesn’t have to be a lengthy process. Simply gather information on a variety of options and take the time to review each before making a final decision.

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How to Get a Fast Personal Loan

How do fast personal loans work? Basically, the borrower either goes in person to a payday loan shop or locates a reputable company online. The next step is to fill out an application and provide basic proof of your ability to pay back the debt.

Most lenders will require that you are at least 18 years old, an active resident of the United States, and otherwise “payday loan free.” You might also have to demonstrate proof that you have a working checking account and that you make a certain amount of money per month vis-à-vis a steady income stream.

Personal Loans for People with Bad Credit

Lenders of fast personal loans will generally not ask you to show proof of credit or require collateral. No one will check your credit report, so you can achieve a financial shot in the arm even if your credit rating is bellow 400. To qualify for fast personal loans, however, you will often have to provide a personal check remitting the amount plus a hefty interest fee. For instance, on a $200 loan, you might be charged a processing fee of $30 or $40.

Terms associated with fast personal loans are typically very brief. You may have 14 days, for instance, to remit the balance. After this time, you may authorize your lender to cash the check you used to take out the loan or ask the lender to rollover the balance to a subsequent pay period. The danger here is that, with each rollover, your interest rate charges tack on more to your total balance. Thus, a small loan of $200 can quickly become an extravagant expense and pave the way to financial insolvency.

Loan terms associated with fast personal loans may be negotiable. Although you generally can't secure loans with collateral, you may be able to pay off the balance with a credit card or otherwise funnel money from your next paycheck to resolve your debt without resorting to claims of bankruptcy or other extreme measures.

Under the right circumstances, fast personal loans can prove immeasurably helpful for dealing with life's unfortunate accidents. However, to guard against using these instruments frequently, build up an emergency fund, and lower your interest rates on your debts.

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Homeowner Personal Loans

Owning a home opens up more borrowing avenues than just your mortgage. When you need funds, whether the need relates to your home or not, you can save money when you take advantage of available homeowner personal loans. These loans may not always be your best option, but knowing how each works can help you narrow your loan search.

Home Equity Loan

A popular option among homeowner personal loans is the home equity loan. This secured loan uses your home as collateral like a mortgage, but your lender files it as a second lien on the property. This means your equity lender gets behind the first mortgage for payment when it comes to a foreclosure.

To protect their investment, equity lenders use a formula to determine how much they can safely lend you. For instance, they may decide that the total of your loans cannot exceed 80 percent of the home’s value. If your home is worth $200,000, they cap your borrowing power at $160,000. When you owe $120,000 to your first mortgage lender, you have $40,000 in available equity to borrow. Sometimes, state law dictates the maximum loan to value, even though financial institutions may set their maximum well below the state’s limit to mitigate their risks.

Home Equity Line of Credit

A home equity line of credit is a more flexible version of the home equity loan. Homeowner personal loans in this form use the same calculations to determine available equity, but you do not receive a lump sum check after closing your loan. Instead, your available equity becomes your credit limit on a revolving credit account. You’re free to borrow from it and repay it as you see fit until loan maturity.

Equity credit lines typically allow you to draw from the line for a period of 10 years. At that time, your lender converts what you still owe into a fixed rate home equity loan, giving you 20 years to repay the full balance. In some cases, your lender will allow you to reapply for a new line of credit with a new maturity date.

The selection of personal homeowner loans available to you can vary based on the state you reside in and your credit history. Although these loans have potential to save you money at tax time, always check with a tax professional before writing off the interest. You should also consider the prevailing interest rates for unsecured loans. If your home equity loan rate is not below what you can get for unsecured credit, it may be time to try a different lender.

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