10 Questions Most People Have About Personal Loans

Are you thinking about getting a personal loan? Perhaps you realize you need money for something you want, and are wondering if a personal loan is the best choice. Lots of people, just like you have gotten personal loans to help reach their goals.

We’ve asked people what some of their top questions about personal loans are and have answered them. Now we share both the questions and the answers with you. We think this will help you also to understand personal loans even more!

1. What type of debt are personal loans considered to be?

Personal loans are “unsecured” debt as they are not backed with collateral. To get a personal loan you do not have to guarantee it with any collateral, such as a house, a car, a boat or anything else. This is why it is considered unsecured debt.

2. What matters the most when you go to apply for a personal loan?

Your credit rating is critical when obtaining a personal loan. A credit rating provides a determination as to your borrowing power. Most often, lenders will look for individuals and families that rate in the range of “excellent” and “good.” But you can obtain a personal loan if your credit rating is lower than this.

740 and higher = excellent

661 to 739 = good

601 to 660 = fair

501 to 600 = poor

500 or lower = bad

As you can see, an “excellent” credit rating is 740 or higher. A “good” credit rating is between 661 and 739. The typical American has a credit rating of 700.

3. What are some of the most popular reasons a person or family would choose to get a personal loan?

A personal loan is a great choice if you have a home improvement project or want to make a big purchase. For example, a family might be expecting another child. So they want to add another room onto their home. Obtaining a personal loan to do this would be a good option. Or if you’re celebrating your 25th wedding anniversary and want to take that romantic honeymoon vacation that you never got to take for your wedding, to Hawaii.

4. I have a lot of credit card debt. Are personal loans a good way to fix this problem?

Some people use a personal loan to pay off credit card debt to avoid paying higher interest rates each month. People have found this is a great way to pay off their debts while avoiding paying the high rates of credit card interest. Everyone’s circumstances are different, so it can depend on how high your credit card interest rate is and the type of personal loan that you obtain. But do keep in mind that some people right now are paying up to 30% interest on their credit cards and a personal loan’s interest rate is far lower than that.

5. Can you use a personal loan to buy a house?

Sometimes the process for getting a personal loan can be quicker than getting a mortgage, depending on your personal circumstances and amount that you need. Everyone’s circumstances are different. One of the great benefits of a personal loan vs. a mortgage is that it requires far fewer documents to be approved. If you have a great credit rating then this could certainly work to your advantage.

6. Okay, I know that every loan has some type of interest. What would you recommend I look for in a personal loan?

The best rate to look for with a personal loan is a fixed rate agreement. You’ll find other types of rates, but with a fixed rate you are paying the same type of interest over the entire period of the loan. This can give the borrower a lot of confidence. It will also help you to plan your budgeting in terms of paying it back.

7. What time period is most often recommended for a personal loan?

A personal loan is typically for about 2 to 5 years. If you think it will take you longer to pay off the money, most experts recommend that you consider breaking your project and the loan into smaller parts. For example, if you have a big home renovation project then you may need to do it in several steps. To pay off one part and then work on the next part. The best timing for a personal loan is to have one for 2 to 5 years most of the time.

8. If I have the money, can I pay my personal loan off 6 months ahead of when it is actually due?

Keep in mind that sometimes if you pay off your personal loan early, it can actually force you to pay additional fees. So actually, you’ll simply want to continue making your regular monthly payments until the loan is completely paid off. We recommend putting that money aside, in your savings account so you know it will be untouched. Then move enough to pay one month payment at a time every month until you’ve paid the whole balance off. After all, who wants to pay early payment penalty fees?

9. Who gets personal loans? Rich people, middle class people or what type of income level most often chooses them?

Actually, people of every income bracket find personal loans quite helpful. One of the best things about a personal loan is that it is determined by your credit rating, not mainly by your income level. So most people with a good credit rating can find they can get a personal loan with confidence.

10. My credit is not great. Can I still get a personal loan?

Yes, you can still get a personal loan. But if your credit rating is poor, your interest rate on a personal loan may be as high as that on a credit card. Part of this will depend on the lender that you work with and their determination of your credit score.

10 Tips New Homeowners Should Know About Getting a Mortgage

Are you thinking about getting your first home? Why, it’s such an exciting time! One thing that intimidates some is the whole process of getting a mortgage. But we don’t want you to feel so challenged by this. That’s why we’re going to share with you some of the most helpful tips we can. That way your mortgage and home offer you and your family great value each day!

1. Start by getting your paperwork in order. Now this is critical. Because most lenders will request the past 5 years of tax returns, your pay stubs and bank statements as well as income and investment information. If you have any debts, you will need to supply this information. They will also ask for a record of your rent payments. Be patient with yourself because even if you are a very organized person, it may take you about 2 weeks to get together all of these documents. You will be very wise to make several copies of everything. Do remember that you’ll need to give the lender a copy. You’ll also want an extra one for your records – in case anything gets misplaced. You may be speaking with several lenders at the same time to see who can offer you the best mortgage rate, so you’ll need copies of the records for each of them.

2. Don’t be enticed by a lower down payment, it will cost you in the long run. This is something to pay attention to. Most lenders ask for about 20% as a down payment, but sometimes you can put down about 10% on a property. Don’t take the bait, because with interest on your mortgage, you are truly paying for this. While it may take you a little more time to come up with that 20% upfront, you will pay so much more putting down the 10% that it truly is worth it to do so.

3. Intimidated by the credit score check? Keep in mind the typical American has a credit score of about 700. People with lower credit scores get mortgages too. So take a deep breath and get your credit score. At the same time you’ll also get your credit report, so you can see who is reporting information to them. If there are any unpaid bills on this report, contact the companies and make plans to pay them as soon as you can. Because this will raise your score.

4. You might find it intimidating or reassuring – but lenders are all different. Remember that mortgage lenders are all in competition with each other. So they will offer different rates, to entice individuals and families to sign up with them vs. a competitor company. Some companies are more welcoming to someone who is a new homeowner. Some are also more welcoming to someone with student loan debt or bad credit. So if one lender turns you down or says “you won’t get a mortgage” realize that they are not speaking for every single company out there.

5. Find out how much homes in the same town or city and that neighborhood tend to sell for. This is a very important step in getting a mortgage. It’s become a bit easier now, with free websites where you can easily see how much homes are worth and what they have sold for. If the home you are looking at getting a mortgage for is $200,000 higher in cost than the other homes in a 3 block radius, then what makes this home special? Does it have more floors or a pool?

6. Look at your credit rating before you apply for a mortgage. Don’t neglect this important step. We recommend you do this, the very instant you are starting to think about buying a home. You can learn your credit score and also check your credit report for any errors and inaccuracies. Because if there are any errors, it will take time for them to be fixed and reported to the credit agencies to raise your credit score.

7. Don’t forget about the closing costs. Most often this is about 5% of your home’s value. For a new homeowner, this can come as a nasty surprise. But you’ve got to keep in mind that these costs exist. Typically they are about 5% but sometimes they can be higher. Ask your real estate agent what is most common in the area that you are looking for a home.

8. Crunch the numbers and figure out what your monthly costs living in your new home would be – before you move in. This is one of the most common mistakes new homeowners make. They pour all of their money into buying the home and then it turns out that they can’t afford the regular monthly expenses of living in the area. It is important that you sit down and actually crunch the numbers.

9. Speak to a real estate agent you trust, to ask what the market in that area is like over time. We highly recommend any new homeowner do this. Actually, you want to speak to a real estate agent who is not trying to sell you the home you are looking at. Take a real estate agent to lunch and ask their opinion about the market for the specific city or town and also the county you are looking at. You can also look online at newspapers over the past several years, to see what homes typically have sold for.

10. Think long term when obtaining a mortgage. For most of us, a home is our biggest asset. So before you sign on the dotted line, think long term. Is this where you see your family living 5 to 10 years from now? A lot of us will be in the same home for that period of time or perhaps longer. You want to get a mortgage for a home your family can feel “at home” in.

10 Tips to Getting a Mortgage with Bad Credit

Did you find a cozy home on a tree lined street with a lovely picket fence that you know your family will just love? This can feel like a huge challenge, especially if you have bad credit. But fortunately, people with bad credit have more options than they might have realized at first. Here are some helpful tips, so you can prepare to move in soon!

1. Start by understanding and getting to know your credit rating. You can get it for free one a year, every year from the TransUnion, Experian and Equifax, the 3 credit reporting agencies. If you’ve realized you’d like to get a mortgage, then now is the perfect time to get your 3 free credit scores to check and see exactly what information is on your credit report. Some discover their credit score it not as bad as they originally thought it might have been. Others have even found mistakes on their reports too.

2. Do keep in mind that someone with a credit score that is “fair” or “poor” will be considered to have poor credit. That is this range that a lender will be looking for. Here are the ratings and what these numbers mean:

740 and higher = excellent

661 to 739 = good

601 to 660 = fair

501 to 600 = poor

500 or lower = bad

If you realize that you have “fair” or “poor” credit, then now is the time to take proactive steps so you are prepared to speak to lenders and be your best advocate. It is the unprepared potential new homeowner who is at a true disadvantage. When you realize your credit score and what you might face, you are in some ways in a much better situation because there are things you can start to do.

3. Remember to always review your credit reports to see if there are any errors. If so, report them immediately to the 3 credit agencies. If there are bills that you have left unpaid, contact your creditors to make arrangements to pay these bills. While the change in the credit score will not happen quickly, this will help to raise your score. Keep in mind that if there are any errors or bills that you are now paying in full, it quite likely will take several months for these to appear as a positive rating on your credit score. This is one of the critical reasons that it is so important to obtain your credit scores and report as soon as you are considering looking at a mortgage. So if any mistakes or errors are there, you have the power to fix them before your official application is submitted to a lender.

4. Get on track now with all of your payments. This can be quite helpful and will also show your potential lenders that you are serious about paying a mortgage. Create a system where you are paying all of your bills on time. On time payments matter a great deal when it comes to your credit score. A lender will take you seriously when they realize you are making 100% of your payments on time, every single time without fail. Consider signing up for automatic bill payments, as this can be an option with some of your utilities, telephone company or other companies that you obtain services from.

5. Realize that most lenders today understand the difference between someone with irresponsible credit & someone who has lost their job. The Great Recession of 2008 has shown many companies and banks that there can be hardworking, responsible people who can be out of work, through no fault of their own. So if you’ve gone through a tough time where you haven’t worked for six months or even longer and it has affected your ability to pay your bills, it’s important to be upfront about your struggles. There is no need to be overdramatic or give them a “sob story” to hear, simply explain your situation.

6. Show records of your rent payments to your lenders too. If these have all been on time, this can work in your favor. Now this is one of the best things that you can do if you have bad credit and are highly concerned about a poor credit score. If you have a good track record of paying your rent on time, this can help your situation tremendously. Show your stubs or rent statements to the lender for at least the past 12 months.

7. Realize that some lenders use a computer software program to at first determine if you are qualified for a mortgage. Fannie Mae is one of such to use a computer software program. If you are turned down, you may have to speak to someone to explain your situation. Today’s companies are embracing technology for more and more purposes. It is simply logical, technology is quite efficient and saves time more often than not. But if you have a special situation, your first application may get turned down. So don’t be surprised if it does and be prepared to approach a supervisor or manager to have a discussion. Do ask if a computer software program determines the first round of eligibility and then see if a person can review your application.

8. Be prepared to explain your low credit score, don’t get defensive or offer excuses. Yes, it’s completely understandable that talking about this may not make you feel good. It’s a tough thing to think about for most of us. But now is actually a good time for you to convince them as to why you are a good candidate to give a mortgage to and you need to make the most of it. Prepare your story ahead of time so you don’t ramble and your facts are well organized.

9. Know that lending is based on trust, that the lender must be confident in your ability to pay the money back. Even if it’s just a £1000 loan. This is one of the most important things to understand about applying for a mortgage. If someone lends you money, they need to trust that they will get it back. So how can you make them feel more of that trustworthiness from you? Provide them with documents so they can see your history and as #9 states, explain your situation.

10. Play “the numbers game” and contact several lenders, so one will be certain to say “yes” to your request. Don’t neglect this important step. Lots of people get turned down by one or a couple of lenders, no matter what their credit score is. So you’ve got to apply to at least a couple of places. We recommend at least 5. Then you’ll find that one who will say “yes” and soon you’ll be moving your family in to your new home!