Recently the financial website MoneyGeek.com asked me to provide expert comments about personal loans for one of its articles. Below is the information I provided. The link to the MoneyGeek.com site is listed at the end of the article.
What tips would you give someone with fair credit considering taking out a personal loan?
If you are considering taking out a personal loan, the first thing to consider is the reason for the loan. Why you need the money will determine your approach to getting the loan. Some common reasons for personal loans are debt consolidation, purchasing cars, home furnishings and home improvements. Never take out a personal travel loan; hopefully, you have saved a little money in a fund for emergencies.
You need to start with the purpose of the loan because if the reason for the loan is to fund a purchase, one of the best places to start is with the company selling what you want to buy. For example, all major car manufacturers have finance divisions that aim to sell cars. You might get a better deal from Ford Motor Credit or Toyota Motor Credit than from a major bank.
Further, sellers of products such as appliances, furniture and hot tubs often work with specific credit card issuers to provide interest-free financing. I have seen terms as long as 36 months with no interest. However, you must make sure you don’t miss any monthly payments because if you miss a payment, you forfeit the “no interest” benefit of the financing.
For financing for other purposes, you can try online lenders such as LendingTree, Upstart and Best Egg. Most online lenders say they will offer you a loan by performing a soft credit check, which is not reported on your credit report.
How can potential borrowers with fair credit compare and evaluate different loan offers?
The variables in any loan really come down to two things: the interest rate and the term of the loan. Typically, the longer the term of the loan (the time from when you take out the loan to when it is paid back), the higher the interest rate.
To compare loan offers, you must get firm offers, and that means providing information to the lender. Lenders typically want information such as the purpose of the loan, your income, how much you pay for rent or your mortgage and other personal information, including your social security number. Once you have provided that information, you should receive an offer. Some websites and financial institutions will offer various offers with varying terms and interest rates.
However, be careful when getting multiple offers. You want to ensure the lender can run a soft credit check because if you have three or four hard credit checks when comparing different lenders, it will reduce your credit score. Also, I am not convinced that running many soft credit checks is a good idea. While lenders and credit reporting agencies say these soft credit checks don’t affect your credit, we know that credit reporting agencies provide information to lenders that may not appear on your credit report.
What are some of the risks associated with taking out a personal loan for those with fair credit?
The greatest risk of taking out a personal loan is the risk that it will reduce your credit score. You will have more debt outstanding, and to get the loan, the lender will check your credit. Every time your credit is run, it is recorded by the credit reporting agency and becomes part of your credit history. Credit inquiries reduce your credit score and stay on your credit report for two years. The more debt on your credit report, the lower your credit score will be.
Today, your credit score is not just about getting a loan. Lenders use your credit score to determine the interest rate you should pay on loans and credit cards and how much credit you can give you. Landlords also use it to determine if you qualify as a tenant, and some businesses perform credit checks on prospective employees. Maintaining a good credit score is vital to navigating your way through life in America.
To find the original posting go to: https://www.moneygeek.com/personal-loans/fair-credit/#expert=michael-manahan