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Personal Loans, Installment Loans, Payday Loans – Which is Right for Me
When you need a loan, there’s no shortage of options. No longer is a bank the only option available, with a wide variety of loans and lenders to choose from.
Choosing the right loan all starts with what would be available to you, and that would depend on one thing before anything else, what your credit score is.
Loans and Credit Scores
Depending on your credit score, the loan type can vary, from high interest payday loans to more acceptable terms from personal loans, or there are installment loans, which fall somewhere in between.
Most that are approved for personal loans have a credit score of over 700 on average, but that doesn’t mean you can’t get one with a lower score. There are some lenders that will allow you to borrow even if your score is around 620-640, and a few that might consider you with a score that’s a little less. This is where the lines become blurred, as the terms and interest start to look like an installment loan.
RELATED: Is 700 a Good Credit Score?
Choosing the Right Loan
It’s not really you that gets to choose your options, it’s your credit score that tells you (and lenders) whether you are a match for the types of loans available.
The better your credit score is, the better the rates and terms tend to be that are available to you. Depending on how much you request and for how long can also be a factor.
Personal loans – if your credit score is at least 700 or better, this is likely the option that will provide you with the best rates and terms available.
Installment loans – should your score be more in the fair to bad credit area, you might be more of a candidate for this type of loan.
Payday loans – when you have bad credit and need money, these high interest rate loans are often the only option for some and should be used as a last resort.
Once you understand the options based on your credit history, it’s easier to see how important your credit score is and whether you might qualify for a personal loan or if you are more of a candidate for a bad credit loan from direct lenders.
Getting a Better Loan
Since your credit score has everything to do with your ability to get a personal loan with good interest rates and terms, it can help to know how to get a personal loan with bad credit if that is the situation that you are in and need it sooner than later.
Being aware of what to know before you apply for a personal loan is always in your best interest so that you are able to identify the best options available to you, and fully understand things like APR, principal, how interest works, or what an unsecured loan is.
The most common use of a personal loan is usually to pay off debt, but sometimes it can be for large purchases, unexpected expenses or other reasons. Educating yourself on the different aspects of such loans is recommended when comparing, along with being aware of the mistakes you can make when taking out a personal loan.
Knowing and using the right approach when comparing personal loans with the best rates can make a world of difference to getting the one that is right for you, along with helping to avoid damaging your credit score in the process. It pays to get some basics down before you start shopping around so that you are confident with the idea that you know a little more about what to look for. You wouldn’t want to pay extra fees or pay more interest, so it’s worth the time to learn a little more before looking, or committing to anything.