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.

Source: http://www.superpages.com/supertips/unsecured-loans.html

READ MORE >>

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.

Source: http://www.superpages.com/supertips/personal-loan-lenders.html

READ MORE >>

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.

Source: http://www.superpages.com/supertips/personal-credit-loans.html

READ MORE >>

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.

Source: http://www.superpages.com/supertips/financial-loans.html

READ MORE >>

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.

Source: http://www.superpages.com/supertips/compare-personal-loans.html

READ MORE >>