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 >>