Depending on why you need a personal loan, items you already own can stand as collateral. Of course, this means that if you cannot pay the loan, you may lose your belongings. To keep that from happening, make sure that you are borrowing wisely and building good relationships with your creditors.
Build and Establish Credit
One of the best ways to build credit is to strive to build good relationships. Open a bank account at a bank or credit union where you can walk in every payday and have a real conversation with people. Arrange to make your direct deposits at this institution. Work to put a few hundred dollars into a savings account, and be sure to open a secured credit card with a $500 limit. Pay the credit card off in full every month. When you need to ask for a loan, go back to this institution.
Be Aware of All Your Assets
Loan restrictions are changing, which means banks have to change how they rate borrowers. These rules are referred to as CECL, or Current Expected Credit Loss. If you have had credit problems in the past or suffer from a low credit score right now, you may still be able to qualify for a personal loan. Your current employment situation and recent changes to your ability to pay the debt can be taken into account even if your credit rating is damaged. Keep in mind that qualitative and environmental factors continue to apply under CECL. If your employment environment has changed, your bank may have more flexibility to work with you.
Consider a Cosigner
If you have someone who can help you to get a personal loan by serving as a cosigner, you can use this option. However, you should only go this route if you are very confident that you can pay back the loan. There are two risks to the cosigner if he or she ops to help you. First of all, he or she may be limited in how much he or she can borrow if an emergency comes up. If he or she needs a loan, your loan will show up as debt on his or her credit report. Secondly, if you do not pay, the cosigner is on the hook for your debt. Too often, family members wind up serving as co-signers. If you do not pay and the loan goes into default, you can damage your credit score, the co-signer's credit score, and your relationship.
Getting a personal loan at a great rate starts with a small loan or secured credit card at your bank. Do your best to keep your loans small and local until you are ready for a sizable investment, such as a home or new car. People with great credit can usually find the best rates.
Here’s another article you might like: What to Keep in Mind About Finances When You're Buying Your First Home
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