Thanks to our lifestyle, it is inconceivable to live without debt. Apart from credit cards, obtaining personal unsecured loans is the most common way of meeting cash requirements. It is possible to get personal loans right from a few hundred dollars to as much as $50,000 or more. The terms that you will be able to get will largely hinge on your credit score, existing debt exposure and your income. Getting personal loans with bad or no credit can be difficult but not impossible. Some of the main factors that you should take into account while looking for the best possible loan:
The Importance of a Good Credit Profile
Not unsurprisingly, the interest rates applicable on loans that are secured are significantly lower than that on unsecured loans. When a lender is advancing an unsecured loan, he does not have the comfort of an asset backing his risk and is therefore forced to judge the possibility of default only by your credit score, which is a consolidation of your past financial discipline. If the amount is on the higher side, the lender can additionally consider your debt-to-income ratio to decide whether you are capable of paying your dues. Both these factors decide the interest rate that you will be offered.
If you have a good credit score, then you have a lot of options for taking an unsecured loan like banks and credit unions. Your local credit union will usually give you the best rates and may even disregard the impact of a less-than-perfect credit report for small loans. You can also explore online for better deals as there are quite a few lenders in that space who are really quite competitive. Many lenders will be inclined to look at factors such as employment history and earnings for applicants with average credit scores and usually offer rates that are higher than for prime customers. Applicants with poor credit will usually be offered high rates unless they can back their application with the collateral of a co-signer with a very good credit profile.
The Advantage of Payday Loans
If you are one of those who will perhaps not be entertained by a bank or credit union due to a poor credit score, and have also maxed out your credit cards, and need to find cash urgently to meet an unexpected requirement, then payday loan direct lenders can come to your rescue for loans of relatively small amounts. Each state has its own laws on the amount of the loan possible and the maximum APR that the lender can charge. Disbursement of payday loans can be very quick once you submit the application together with proof of identity, address, employment and income details. Payday lenders do not ask for credit scores but interest rates are typically higher.
An unsecured personal loan can help you to cover sudden and unanticipated expenses, however, you need to look at all the options and consider the best terms before making your choice. It is best not to over-borrow and to pay back on time.
Author bio: Sue Welles covers the finance sector for a prominent newspaper. She follows trends in the personal finance space, including the exponential growth of payday loan direct lenders.