If you are looking for ways to improve your credit scores, one way to do this is to get a personal loan, also known as a signature loan or an unsecured loan, from a bank or credit union or other type of lender. These loans can be a great way to establish a credit history and boost scores as long as you pay the money back on time.
You also might be considering a personal loan for other reasons such as: consolidate other debts, pay for something without incurring the exorbitant interest rates that are often attached to credit cards, or buy something you simply don’t have enough credit for.
No matter your reason, a personal loan can be a great solution for you. Of course, you do want to pick the most affordable personal loan that you can find. Take note of these simple tips to getting the best deal possible.
Get Your Credit and Do Your Homework
Before you begin the process of looking for a loan, be familiar with your credit score and credit report. You are entitled to a free copy of your credit report annually. See our section on Get Free Credit Report. Review your report for any discrepancies and errors which if corrected could improve your scores. See our section on Credit Repair.
Now that you know your credit situation you can then begin to look for lenders and loan programs that you will fit into. This might not come as a surprise to you, but there are significant differences in the interest rates, terms and programs that you can get on just a little adjustment in your credit scores. There are some loans that just are not worth applying for -- they might only be available to people with near-perfect credit.
Shop Around but Not Too Much
Having too many loan applications floating around out there can hurt your chances of getting one at all. Every lender that you apply for a loan with will have to get their own copy of your credit report. You can hurt your credit scores by having too many companies pull your credit. A couple of companies are ok, but do not get crazy. The only time your scores are not hurt much at all when applying for a loan is when you apply for a mortgage or for an auto loan.
Compare Loans Online and Locally
There are plenty of comparison sites on the Internet to help you examine the particulars of several loans at the same time. These can be valuable tools to help you familiarize yourself with the options, but keep in mind you can often get the best deal if you then go straight to the lender you’ve chosen rather than letting a third-party site to arrange the loan. Use that phone and call lenders as well -- sometimes the best rates are not even publicized.
Work with Someone You Trust
If you’ve done any business with a particular lender in the past, (or say you have a bank that’s always treated you well), check in with them to see what they can offer up in the way of a personal loan. Often times, people with not-so-perfect credit will get somewhat better consideration from finance companies with which they’ve already established a relationship. Before you do this, though, make sure you’ve followed the first two steps above to ensure the deal you’re being offered is competitive and worth your while to consider.
Apply for Loan Insurance with Your Loan
You need to know this trick if you have any doubts about whether you can get a loan or not. It is possible to lie about things on your credit application in order to get the loan. Believe it or not, you can make your application more attractive to a lender without lying. For example, lenders make a great deal of money on loan insurance, so they might just look more favorably on your loan if you request it. Know though that it's far more advantageous for you to provide your own standalone insurance (if you want insurance at all).
Here’s how you take advantage of this situation: Request a loan quote with insurance included, knowing that you’re more likely to get approved this way. When you receive the paperwork to sign, you then request for a quote without the insurance included. Since they've already signed off on your loan, it might be very difficult for them to justify denying your application at this stage of the game. Be sure to act quickly, however, or it might backfire on you once they realize what you’re up to.
Other Factors to Consider than the APR When Getting a Loan
The annual percentage rate is, of course, the figure that you're most likely to see advertised. The APR serves as a way to compare loans. Be very careful about judging a loan by its APR alone. Banks can very easily manipulate the APR in order to make the loan seem much less expensive than it really is. As an alternative, use the total amount repayable as a gauge to determine how much the loan will cost you overall. Also make sure to find out in advance what the monthly payment will be if you’re on a strict monthly budget -- which you might just be if you’re considering taking out a loan.
Report Payment History to the Credit Bureaus
If you are getting the loan for the purposes of either establishing credit, or improving credit then you want to make sure you go with a lender who reports your account and payment history to the credit bureaus. Not all lenders will do this, especially if you are using some type of payday loan company. You do not want to waste your time and energy to set up the loan, pay it back to not have it reflect in your credit report. Ask the lender up front, do you report my payment history to the credit bureaus. If they say yes then you are one step closer to getting your loan and moving your credit up.
