Common Credit Questions Answered
Common Credit Questions Answered
Many people are confused about the different types of loans offered by lending institutions and just how these loans will affect the borrower’s credit. Here are the answers to a few questions about the most basic types of loans:
Q. How can I get a loan?
A. There are three basic types of loans:
- Secured loans—these loans can be for large sums of money, but they will require some type of collateral. Examples of secured loans are auto loans and mortgages where a car or house is used as collateral. You can borrow a significant amount of money, but if you default on the loan creditors have the right to repossess your car or house depending on the loan. These loans can extend over a term of as much as 10 years.
- Unsecured loans—these loans have no collateral attached to them. The amount of money you can borrow and the interest rate on an unsecured loan will depend on how risky the institution feels it is to lend you money, so your credit will make this loan more or less expensive for you. These loans are usually for $1,000 – $25,000 and they are repaid over a term that will be decided with the lender but usually range from 1 – 5 years.
- Bad Credit loans—this is a type of unsecured loan designed for people with bad credit. Many lenders will grant a loan to an individual with less than ideal credit if they can prove they have a reliable source of income. These loans are typically for less money than unsecured loans that require a credit check. Their rate of interest is also going to be very high because they are considered risky to lenders. The term of this loan will also vary.
- Payday loans—sometimes called “cash advances,” this type of loan is for a small amount of money to be repaid over a very short term, usually no more than a month. Typically, a pay day loan will be for no more than $1,000. These loans do not require a credit check, so their rates of interest are very high.
Q. How will getting a loan affect my credit?
A. It depends on what kind of loan you get and how many loans you get. Pay day loans are a bit different, so we’ll talk about them later. Each time a lending company checks your credit to see if you are worthy for a loan, your credit score goes down 5 points. If you are approved for a loan, you will be able to make up that loss of points through making timely, monthly payments on your loan—that is, if you are below a certain amount of debt. If you are borrowing more than 40% of your total available credit, that will also hurt your credit score. So, for example, if you have a credit limit of $1,000 and you get a loan that requires a credit check for $600, then you will likely loss a significant number of points from your credit score, though this loss will be mitigated if you make consistent payments.
Payday loans are the exception to this rule. Getting a pay day loan will not affect your credit score because they do not require a credit check. If you repay your loan according to the lender’s terms, then a pay day loan will not show up on your credit report, so it will not affect your credit score. If you violate the terms of the loan, then that will show up your credit report and negatively affect your credit. But this is a double edged sword. A pay day loan will not hurt your credit if you pay it back on time, but it will not help your credit either. Pay day loans that are paid off according to the lender’s terms are not recorded on your credit report, so it will not improve your credit score by strengthening your history of consistent payments.
When you are in financial trouble, finding personal loans to suit your purpose can be difficult, and if you don’t know what you are looking for, you may end up in even bigger trouble. By taking the time to learn about loans before you start applying, you will find that you can get the loan that you need quickly.
In the past, if you wanted to get personal loans, you didn’t have a lot of options. You could go to your local bank if you had an account with them, and if you were in good standing, they might give you a loan. But if you had bad credit, you might have had to get a loan from a pawn shop or a cash advance company. These loans are notoriously expensive to get and can put you in even more financial trouble.
Over the past few years, as the economy has gotten tighter and tighter, most of the large banks and credit card companies have stopped issuing any types of personal loans or credit, except for people who already have a lot of money. If you are in a pinch and find that you are having trouble getting money, then you are not alone. Luckily, there are places you can go online that will help you get what you need.
Over the past few years, as the economy has turned sour, more and more people have found that their credit score is too low to obtain any kind of credit. Yet, in today’s world, if you don’t have access to cash quickly, you could be in a lot of trouble. So even if you do have a low credit score or a past bankruptcy, it is good to know that you can still get personal loans to help you out of a bind.
Most people know that when you have bad credit, no one wants to talk to you. You can’t get a place to live, a job, a credit card or even a good rate on your car insurance. It seems that most people have no idea how important their credit score is to them until after their score is already ruined.
There is no denying that owning a home can be expensive. You have the monthly mortgage payment, property taxes and homeowners’ insurance that can really add up over the course of a year. These costs, however, are likely factored into your monthly budget and are set at a reasonable level that you can afford. There are other home expenses, however, that may not be quite so planned and expected, and they can cost you a pretty penny. Luckily, you can get personal loans to help pay for such expenses.
Accidents are expensive, and unfortunately you just never know when they are going to happen. They can cause damage to your property or someone else’s property that you may have to pay for. They may cause some physical injuries to yourself or loved ones that can give you some pretty costly medical bills. Some very fortunate people have incredible comprehensive insurance that will cover all of their expenses without the need to pay for co-pays and deductibles. Other people are faced with having to pay high co-pays and deductibles for the cost of the accident, and still others don’t have any insurance at all and have to pay for the entire accident out of pocket.
If you have medical insurance, you may find that unexpected accidents, illnesses or even a much-needed surgical procedure has left you with a stack of co-pay and deductible bills. If you do not have insurance coverage, your medical bills may be mounting to astronomical proportions. Either way, you need to find a solution to help you pay for your medical bills, and the good news is that personal loans can help.
With the economy down in the dumps, many people just like you are having trouble trying to make ends meet. You may find yourself in a situation of having just enough cash coming in each month to pay the bills that you have, but when other things come up, you simply don’t have the cash available. Personal loans are available that can help you cover your expenses until payday arrives, which means that you can pay your bills without worrying about where your meals will come from or how you will fill up your gas tank to get to work.