Personal Loan Basics: Borrowing 101
Personal loans are important financial tools that can help you close a gap in your budget. If there are important things you’ve been putting off, financing can give you the freedom to pay for that new pet, medical procedure, home renovation, and more. Used correctly, loans can even help you become more financially responsible. Here is some information to get you more familiar with personal loans and how they work.
What Are Personal Loans Used For?
Put simply, personal loans are a type of financing that you can use on almost anything you wish. Unlike mortgages or car loans, personal loans don’t have to be used for one thing. Things that people typically use personal loans for include surgeries and other medical procedures, pets and pet costs, wedding expenses, home renovations, legal fees, consumer goods including furniture, electronics and jewelry, debt consolidation.
When you take out a personal loan, you repay it with interest over the term of your loan. Unlike with most credit cards, the repayment period and interest rates are fixed – you pay a set amount for a set time (however, LendingUSA allows you to repay the loan before the end of the agreement with no penalty). This allows you to convert a large up-front cost into a more manageable monthly payment.
How to Get a Personal Loan
To get a loan, you have a few options. You can head to your bank or financial institution, but this method may mean a long wait before you get your loan approved. The bank may also require you to come in and speak to a loan officer as part of the application process.
Another option is to check your rate with LendingUSA. LendingUSA specializes in personal loans, and we have customers around the country who rely on our services. Because personal loans are our specialty, we have a streamlined system for getting you a quick loan decision. We offer competitive rates and an easy financing process, so you can spend less time worrying and more time living!
How to Approach the Loan Process/How Personal Loans Work
The loan process doesn’t have to be complicated. To get approved, there are only a few steps to follow.
1. Find Out Your Credit Score
Lenders make money by offering loans. The interest you pay is the money lenders earn in exchange for letting you borrow from them. Lenders cannot make money unless their loans are repaid, which is why they take the time to only approve the customers with a high chance of repaying.
How do lenders know whether someone is a good risk for a loan? They look at their credit score, which is a number representing how well they’ve paid bills and handled credit before. The higher your credit score, the more likely you are to get a loan, and the lower your interest rate will be.
You are entitled to one free credit report per year from Equifax, Experian, and Trans Union, the three major credit reporting agencies. A score of 750 is considered an excellent credit score. If your score is lower, you can improve it by doing these three things: Reporting and ensuring credit bureaus fix any mistakes on your credit score, paying your bills on time, and paying down your credit cards and loans.
Over time, as you do these things consistently, your credit score will improve. Once it does, you will qualify for better credit rates.
Another thing you can do to improve (or establish) a credit score if you don’t have a long history is to take out personal loans and pay them on time. This will help show lenders you are responsible with money and can be trusted with loans.
If you do have below-average credit and don’t have time to work on your credit score, LendingUSA offers specialty programs for sub-prime borrowers.
2. Check Your Rate
The approval process period can be very fast or very slow, depending on your lender. LendingUSA is proud to offer fast loan decisions to applicants, with loan approvals in as fast as seven minutes.
One benefit of applying for an installment loan versus applying for a credit card is that you will not hurt your credit score by checking your rate for a loan. This is because checking your rate is a “soft” inquiry on your credit. However, completing your loan documents will result in a “hard” inquiry, similar to a credit card application.
3. Start Your Payments
Once you have been approved for a loan and the funds are deposited, your payment schedule will begin. If you don’t already have a budget for each month, it may be useful to come up with one, so you can better manage your loan payments and other bills.
Setting up a budget is easy. Just create a list of what you need to pay each month, and how much each item will cost. Any remaining amount can go into your savings account.
Ready for more information on personal loans and what they can do for you? Call LendingUSA at 1-(800) 994-6177 or check your rate online!
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