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Life can feel overwhelming when you’re saddled with loads of debt from different creditors. Maybe you carry multiple credit card balances on top of having a high-interest personal loan.
Or maybe you have a loan with an adjustable-rate and your payments are starting to rise each month, making your budget more and more uncomfortable.
In these situations, it may be wise to look at a debt consolidation loan. For some people, it’s a smart choice that gets your debts organized while potentially lowering your monthly payments. Ready to learn more? Let’s get started.
Best Debt Consolidation Loan Lenders of 2021
We’ve compiled a list of the best debt consolidation loans online, along with their basic eligibility requirements. Research each one carefully to see which one can help you with your debt consolidation.
Different lenders are ideal for different borrowers. Review these options and take a look at which ones best suit your needs as well as your credit profile. Once you have your own shortlist, you can get prequalified to compare loan options and find the best offer.
Since 2012, DebtConsolidation.com has worked with borrowers to find the best debt consolidation service for their unique situation. If you are not really sure where to get started with your debt repayment process, then this is a good place to start.
The company offers many resources, tools, and relief programs on how to get out of debt quickly. Wherever you are at on your debt repayment journey, they may be able to help.
After you provide some information about your debts, the website will present the best way forward. You may be matched to debt consolidation loans, debt settlement companies, or credit counseling depending on your individual situation.
You can easily compare several different options through this service which is a great way to start your debt repayment journey off right!
It is completely free to use their services. However, when you are matched to a partner, the partner may charge fees for their services. Always make sure to understand the exact terms of your debt consolidation loan before moving forward with any company.
Marcus by Goldman Sachs
If you’re looking for an online-only lender, then Marcus by Goldman Sachs may be the right choice for you. Marcus offers personal loans that can be used for debt consolidation.
If you have a credit score of 660 or higher, you may qualify for a personal loan between $3,500 and $40,000. The APR range is between 6.99% and 28.99%.
One of the best things about taking out a loan through Marcus is how transparent the bank is. There are no hidden fees and that includes late fees, which is pretty rare among other lenders.
Plus, the bank gives you the option to choose your own payment due date. After making 12 months of consecutive payments, you can defer one monthly payment if you want.
The only real downside is that you’ll need good to excellent credit to qualify. And Marcus won’t let you apply with a co-signer.
Read our full review of Marcus
Avant is designed for borrowers with average credit or better and offers a number of perks for debt consolidation.
You can get help with your debt management by getting free access to resources, plus you receive regular updates on your VantageScore to track your credit repair process.
In fact, the average borrower using the funds for debt consolidation sees a 12-point increase within the first six months. So who can get a loan through Avant?
Most borrowers have a credit score between 600 and 700. While you don’t need to meet a minimum income threshold, most customers earn between $40,000 and $100,000 each year.
One of the great things about borrowing with them is that once you are approved and agree to your loan terms, you can get funding in as little as a day. This is a great benefit if you have a number of due dates coming up and want to get started paying off your current creditors as soon as possible.
Their loan terms range anywhere between two and five years, so you can choose to either pay off your debt aggressively or take the slow and steady route.
Read our full review of Avant
If you have fair to good credit, you may be eligible for a debt consolidation loan from Payoff. The company offers debt consolidation loans with competitive rates and flexible repayment terms. Payoff focuses on helping borrowers pay down their high-interest credit card debt.
Payoff does this by providing debt consolidation loans between $5,000 and $35,000. The APR range is between 5.99% and 24.99%, depending on your credit score. The repayment terms will be between two and five years.
One of the advantages of taking out a debt consolidation loan through Payoff is the additional support they provide. Payoff doesn’t just want to help you repay your debt; they want to help you build a solid financial future.
The lender will provide financial recommendations, tools, and resources to help you stay on track. This will help you meet your short-term goals and build positive long-term financial habits.
Read our full review of PayOff
Upstart’s target borrower is a younger person with less established credit. So maybe you don’t have a problem with bad credit, but you have a problem with no credit. When you apply for an Upstart loan, more emphasis is placed on your academic history than your credit history.
They’ll review your college, your major, your job, and even your grades to help make you a loan offer. The minimum credit score is 620. Most borrowers are between 22 and 35 years old, but there are no technical age restrictions.
However, one requirement is that you must be a college graduate, which obviously limits the applicant pool. And while loan amounts range up to $25,000, you only have one term option: three years.
They don’t offer the most flexibility, but it does have competitive rates and a unique approval model that may help some borrowers who want a loan.
Read our full review of Upstart
PersonalLoans.com directly helps individuals with low credit scores so this is a great place to come if you’re still in the credit repair process.
However, there are a few restrictions: you cannot have had a late payment of more than 60 days on your credit report, a recent bankruptcy, or a recent charge-off. But if you meet these basic guidelines, PersonalLoans.com may be a good option for you.
PersonalLoans.com is unique in that it’s a loan broker, not an actual lender. Through the application, you’ll get offers from traditional installment lenders, bank lenders, and even peer-to-peer lenders.
Your actual loan agreement that you choose is signed between you and the lender, not PersonalLoans.com. This provides a convenient way to compare rates and terms through just a single application process.
Read our full review of PersonalLoans.com
LendingClub is a peer-to-peer lender. That means rather than having your loan funded directly by the lender, your loan application is posted for individual investors to fund.
Additionally, your interest rate and terms are determined by your credit profile. The minimum credit score is just a 600, but the average borrowers is higher.
LendingClub boasts competitive rates; in fact, its website claims that the average debt consolidation borrower lowers their interest rate by 30%. You can use the website’s personal loan calculator to determine how much you could actually save by consolidating your debt.
There’s also a large-cap on loans, all the way up to $40,000. That’s on the higher end for many online lenders, especially those open to individuals with lower credit.
Read our full review of LendingClub
Upgrade appeals to all different types of borrowers. When assessing a new borrower, the lender considers various factors, including their credit score, free cash flow, and debt-to-income ratio.
The company offers personal loans that can be used for many different purposes, including debt consolidation. Upgrade will even make payments directly to your lender for added convenience.
If you have a minimum credit score of 600, you may qualify for a personal loan between $1,000 and $50,000. When you apply, the lender will do a soft pull on your credit so it won’t affect your credit score.
Upgrade is one of the best options for borrowers with poor credit and borrowers with a high debt-to-income ratio. And the lender offers a hardship program, so if you fall on difficult times financially, you may receive a temporary deduction on your monthly payments.
Read our full review of Upgrade
Discover offers personal loans for borrowers with good to excellent credit. You can use a personal loan from Discover to consolidate your existing high-interest credit card debt.
If you qualify, you’ll receive a personal loan between $2,500 and $35,000. The APR range is 6.99% to 24.99%. And the bank never charges any origination fees.
You must have a minimum credit score of 660 to qualify, so Discover isn’t a good option for borrowers with bad credit. And unfortunately, Discover doesn’t give borrowers the option to apply with a co-signer.
Read our full review of Discover
With an A+ rating from the Better Business Bureau, OneMain is a lender committed to customer satisfaction. While they offer debt consolidation loans up to $25,000, you can also get a loan for as little as $1,500.
This is one of the lowest loan minimums we’ve seen, which is perfect if you have just a small amount of debt you’d like to consolidate because of exorbitant or adjustable interest rates.
In addition to applying online, you can also elect to meet with a financial adviser at a OneMain branch location.
In fact, part of the application process entails meeting with someone either at a branch or remote location to ensure you understand all of your loan options. This is a great step that most online lenders lack, allowing you to really take the time to weigh your options and decide which is best for you.
Read our full review of OneMain
Best Debt Settlement Companies of 2021
Taking out a debt consolidation loan is just one option when you want to lower your monthly payments. Another way to go is enrolling in a debt settlement program. Rather than paying off your lender in full, a debt settlement company can help negotiate an amount to repay so that the debt is considered settled.
In the meantime, you agree to freeze your credit cards and deposit cash each month into an account that will eventually be used to pay off the settlement.
However, the downside is that to make this strategy work, you must stop making payments on your owed amounts, which will cause them to go into default. That means your credit score will take a nosedive. But, the goal is to pay less than what you owe.
If you have enough debt that it seems impossible for you to ever repay, debt settlement might be a better option than filing for bankruptcy. Below are Crediful’s top two picks for debt settlement companies. You can find the full list here.
Accredited Debt Relief
Accredited regularly works with major banks and lenders to help clients negotiate settlements. These include Bank of America, Wells Fargo, Chase, Capital One, Discover, and other financial institutions of all sizes, both large and small.
They’ll even work with retailers if you have store cards with major balances. While results vary from person to person, they offer examples of clients saving anywhere between 50% and 80% on their amounts owed.
Read our full review of Accredited Debt Relief
National Debt Relief
National Debt Relief has an A+ rating with the Better Business Bureau and prides itself on trying to help those who truly have financial hardships in their lives.
One benefit of working with this company is that your funds are held in an FDIC-insured account that is opened in your name.
That means you have full control over the account and don’t run the risk of being scammed out of your money — you can rest assured that National is a reputable company.
Plus, the team is fully versed in consumer and financial law so you can trust that your interests are being served to the fullest legal extent possible.
Read our full review of National Debt Relief
What is debt consolidation?
Debt consolidation allows you to pull all of your smaller existing debts into one new debt that you pay each month. When you take out a debt consolidation loan, you receive funds to pay off all of your existing debt, like your credit card balances and high-interest loans.
You then make a single monthly payment to your lender, rather than making multiple payments each month. Keep in mind that this is different from debt settlement in that you’re not negotiating a new amount owed. Instead, you keep the same amount of debt but pay it off in a different way.
Depending on your personal situation, debt consolidation comes with both pros and cons. It’s important to weigh both sides carefully before deciding if a debt consolidation loan is right for you.
Let’s delve into the details so that you can get closer to making a decision.
Advantages of Debt Consolidation
There are a number of advantages associated with debt consolidation loans.
Lower Your Monthly Payments
The biggest benefit is the ability to lower your combined monthly payments. Because interest rates on credit cards are so high, it’s possible that you can find a lower interest rate on a debt consolidation loan instead, which means lower payments.
However, your actual interest rate depends on several factors, especially your credit score. It’s important to compare interest rates and the total cost of the debt consolidation loan to your current payments to make sure you don’t end up paying more over time. The goal is to save you money.
Improve Your Credit Score
Another advantage of debt consolidation is that it can actually help increase your credit score. While your amount of debt stays the same, installment loans are viewed more favorably than credit card debt.
So if the majority of your debt comes from maxed-out credit cards, you could potentially see a rise in your credit score because your credit utilization on each individual card has gone down.
A debt consolidation loan streamlines your monthly payments. Rather than being inundated with multiple due dates each month, you simply have one to remember. This also contributes to building a healthy credit score because it lowers your chance of having a late payment.
Disadvantages of Debt Consolidation
In some cases, debt consolidation loans might not be a great idea. We talked about the total cost of the loan, which needs to be reviewed holistically, not just as a monthly payment. This is true for several reasons.
First, most lenders charge some sort of fee when you take out a new loan. The most common is an origination fee, typically charged as a percentage of the total loan amount.
So if you need a $10,000 loan and there is a 4% origination fee, you’ll only actually receive $9,600. Next, compare interest rates and loan terms.
Even if the monthly payments look good on paper, you may be paying a lot more over an extended payment period. You can use the APR to compare interest rates and fees, but you also need to consider how much you’ll spend on interest over the entire loan term.
Changing Your Spending Habits
Finally, it doesn’t necessarily fix the root problem of your debt.
This isn’t something you need to worry about if your debt results from a one-time incident, such as an expensive medical procedure or temporary job loss. But if you habitually spend more than you earn and are still incurring new debt, then debt consolidation loans will not help you in the long run.
If this sounds like you, try to figure out how you can curb your spending to stop accruing more debt. You can even talk to a debt counselor to help create a sound management plan for your finances.
A payday loan is a short-term loan with a high annual percentage rate. Also known as cash advance and check advance loans, payday loans are designed to cover you until payday and there are very few issues if you repay the loan in full before the payment date. Fail to do so, however, and you could be hit with severe penalties.
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Lenders may ask the borrower to write a postdated check for the date of their next paycheck, only to hit them with rollover fees if that check bounces or they request an extension. It’s this rollover that causes so many issues for borrowers and it’s the reason there have been some huge changes in this industry over the last decade or so.
How Do Payday Loans Work?
Payday lending seems like a simple, easy, and problem free process, but that’s what the payday lender relies on.
The idea is quite simple. Imagine, for instance, that your car suddenly breaks down, payday is 10 days away, and you don’t have a single cent to your name. The mechanic quotes you $300 for the fix, and because you’re already drowning in debt and have already sold everything valuable, your only option is payday lending.
The payday lender offers you the $300 for a small fee. They remind you that if you repay this small short-term cash sum on payday, you won’t incur many fees or any real issues. But a lot can happen in 10 days.
More bills can land in your mailbox, more expenses can arrive out of nowhere, and before you know it, all of your paycheck has been allocated for other expenses. The payday lender offers to rollover your loan for another month (another “payday”) and because you don’t have much choice, you agree.
But in doing so, you’ve just been hit with more high fees, more compounding interest, and a sum that just seems to keep on growing. By the time your next payday arrives, you’re only able to afford a small repayment, and from that moment on you’re locked into a debt that doesn’t seem to go anywhere.
Payday loans have been criticized for being predatory and it’s easy to see why. Banks and credit unions profit more from high-income individuals as they borrow and invest more money. A single high-income consumer can be worth more than a dozen consumers straddling the poverty line.
Payday lenders, however, target their services at low-income individuals. They offer small-dollar loans and seem to profit the most when payment dates are missed and interest rates compound, something that is infinitely more probable with low-income consumers.
Low-income consumers are also more likely to need a small cash boost every now and then and less likely to have the collateral needed for a low-interest title loan. According to official statistics, during the heyday of payday loans, most lenders were divorced renters struggling to make ends meet.
Nearly a tenth of consumers earning less than $15.000 have used payday loans, compared to fewer than 1% for those earning more than $100,000. Close to 70% of all payday loans are used for recurring expenses, such as utility bills and other debts, while 16% are used for emergency purchases.
Pros and Cons of Taking Out a Payday Loan
Regardless of what the lender or the commercial tells you, all forms of credit carry risk, and payday loans are no exception. In fact, it is one of the riskiest forms of credit available, dragging you into a cycle of debt that you may struggle to escape from. Issues aside, however, there are some benefits to these loans, and we need to look at the cons as well as the pros.
Pros: You Don’t Need Good Credit
Payday loans don’t require impeccable credit scores and many lenders won’t even check an applicant’s credit report. They can afford to do this because they charge high interest and fees, and this allows them to offset many of the costs associated with the increased liability and risk.
If you’re struggling to cover your bills and have just been hit with an unexpected expense, this can be a godsend—it’s a last resort option that could buy you some time until payday.
Pros: It’s Quick
Payday loans give you money when you need it, something that many other loans and credit offers simply can’t provide. If you need money right now, a payday lender can help; whereas another lender may require a few days to transfer that money or provide you with a suitable line of credit.
Some lenders provide 24/7 access to money, with online applications offering instant decisions and promising a money transfer within 24 hours.
Pro: They Require Very Little
A payday loan lender has a very short list of criteria for its applicants to meet. A traditional lender may request your Social Security Number, proof of ID, and a credit check, but the average payday lender will ask for none of these things.
Generally, you will be asked to prove that you are in employment, have a bank account, and are at least 18 years old—that’s it. You may also be required to submit proof that you are a US citizen.
Cons: High Risk of Defaulting
A study by the Center for Responsible Lending found that nearly half of all payday loans go into default within just 2 years. That’s a staggering statistic when you consider that the average default rate for personal loans and credit cards is between 1% and 4%.
It proves the point that many payday lender critics have been making for years: Payday loans are predatory and high-risk. The average credit or loan account is only provided after the applicant has undergone a strict underwriting process. The lender takes its time to check that the applicant is suitable, looking at their credit history, credit score, and more, and only giving them the credit/loan when they are confident it will be repaid.
This may seem like an unnecessary and frustrating process, but as the above statistics prove, it’s not just for the benefit of the lender as it also protects the consumer from a disastrous default.
Con: High Fees
High interest rates aren’t the only reason payday lenders are considered predatory. Like all lenders, they charge fees for late payments. But unlike other lenders, these fees are astronomical and if you’re late by several weeks or months, those fees can be worth more than the initial balance.
A few years ago, a survey on payday lending discovered that the average borrower had accumulated $458 worth of fees, even though the median loan was nearly half that amount.
Cons: There are Better Options
If you have a respectable credit history or any kind of collateral, there are better options available. A bank or credit union can provide you with small short-term loans you can repay over many months without accumulating astronomical sums of interest.
The interest rates are much lower, the fees are more manageable, and unless your credit score is really poor, you should be offered more favorable terms than what you can get from a payday lender.
Even a credit card can offer you better terms. Generally speaking, a credit card has some of the highest interest rates of any unsecured debt, but it can’t compare to a payday loan. It also has very little impact on your credit score and many credit card providers offer 0% on purchases for the first-few months.
What’s more, if things go wrong with a credit card, you have more options than you have with a payday loan, including a balance transfer credit card or a debt settlement program.
Why Do Payday Loans Charge So Much Interest?
If we were to take a cynical view, we could say that payday loans charge a lot simply because the lender can get away with charging a lot. After all, a payday loan lender targets the lowest-income individuals, the ones who need money the most and find themselves in desperate situations.
However, this doesn’t paint a complete picture. In actual fact, it all comes down to risk and reward. A lender increases its interest rate when an applicant is at a greater risk of default.
The reason you can get low rates when you have a great credit score and high rates when you don’t, is because the former group is more likely to pay on time and in full, whereas the latter group is more likely to default.
Lending is all about balancing the probabilities, and because a short-term loan is at serious risk of defaulting, the costs are very high.
Payday Loans and Your Credit Score
Your credit will only be affected if the lender reports to the credit bureaus. This is something that many consumers overlook, incorrectly assuming that every payment will result in a positive report and every missed payment in a negative one.
If the lender doesn’t report to the main credit bureaus, there will be no changes to your report and the account will not even show. This is how many payday lenders operate. They rarely run credit checks, so your report won’t be hit with an inquiry, and they tend not to report on-time payments.
However, it’s a different story if you miss those payments. A lender can report missed payments and defaults and may also sell your account to a debt collector, at which point your credit score will take a hit.
If you’re concerned about how an application will impact your credit score, speak with the lender or read the terms and conditions before applying. And remember to always meet your payments on time to avoid any negative marks on your credit report and, more importantly, to ensure you’re not hit with additional fees.
Payday Loans vs Personal Loans
A personal loan is generally a much better option than a payday loan. These loans are designed to help you cover emergency expenses, pay for home improvements, launch businesses, and, in the case of debt consolidation loans, to clear your debt.
The interest rates are around 6% to 10% for lenders with respectable credit scores, and while they often charge an origination fee and late fees, they are generally much cheaper options. You can repay the loan at a time that suits you and tailor the payments to fit your monthly expenses, ensuring that they don’t leave you short at the end of the month.
You can get a personal loan from a bank or a credit union; whenever you need the money, just compare, apply, and then wait for it to hit your account. The money paid by these loans is generally much higher than that offered by payday loans and you can stretch it out over a few years if needed.
What is an Unsecured Loan?
Personal and payday loans are both classed as unsecured loans, as the lender doesn’t secure them against money or assets. Secured loans are typically secured against your home (mortgage, home equity loan) or your car (auto loan, title loan). They can also be secured against a cash deposit, as is the case with secured credit cards.
Although this may seem like a negative, considering a lender can repossess your asset if you fail to meet the payment terms, it actually provides many positives. For instance, a secured loan gives the lender more recourse if anything goes wrong, which means the underwriters don’t need to account for a lot of risk. As a result, the lender is more likely to offer you a low interest rate.
Where cash advance loans and other small loans are concerned, there is generally no option for securing the loan. The lender won’t be interested, and neither should you—what’s the point of securing a $30,000 car against a $1,000 loan!?
New Payday Loan Regulations
Payday lenders are subject to very strict rules and regulations and this industry has undergone some serious changes in recent years. In some states, limits are imposed to prevent high interest rates; in others, payday lenders are banned from operating altogether.
The golden age of payday lending has passed, there’s no doubt about that. In fact, many lenders left the US markets and took their business to countries like the UK, only for the UK authorities to impose many of the same restrictions after a few years of pandemonium. In the US, the industry thrived during the end of the 2000s and the beginning of the 2010s, but it has since been losing ground and the practice is illegal or highly restricted in many states.
Are Payday Loans Still Legal?
Payday loans are legal in 27 states, but many states have imposed strict rules and regulations governing everything from loan amounts to fees. The states where payday lenders are not allowed to operate are:
It is still possible to apply for personal loans and title loans in these states, but high-interest, cash advance loans are out of the question, for the time being at least.
Debt Rollover Rules for Payday Lenders
One of the things that regulations cover is something known as Debt Rollover, whereby a consumer rolls their debt over into the next billing period, accruing fees and continuing to pay interest. The more rollovers there are, the greater the risk and the higher the detriment to the borrower.
Debt rollovers are at fault for many of the issues concerning payday loans. They create a cycle of persistent debt, as the borrower is forced to acquire additional debt to repay the payday loan debt.
In the following states, payday loans are legal but restricted to between 0 and 1 rollovers:
Other states tend to limit debt rollovers to 2, but there are some notable exceptions. In South Dakota and Delaware, as many as 4 are allowed, while the state of Missouri allows for 6. However, the borrower must reduce the principal of the loan by at least 5% during each successive rollover.
Are These Changes for the Best?
If you’re a payday lender, the aforementioned rules and regulations are definitely not a good thing. Payday lenders rely on persistent debt. They make money from the poorest percentage of the population as they are the ones most likely to get trapped in that cycle.
For responsible borrowers, however, they turn something potentially disastrous into something that could serve a purpose. Payday loans still carry a huge risk, especially if there is any chance that you won’t repay the loan in time, but the limits imposed on interest rates and rollovers reduces the astronomical costs.
In that sense, they are definitely for the best, but there are still risks and potential pitfalls, so be sure to keep these in mind before you apply for any short-term loans.
Buying a car is perhaps one of the most expensive purchases you’re going to make in your life — besides buying a house. The cost of a vehicle varies depending on the month, day or time of the year. So knowing the best time to buy a car, whether it is new or used, can save you thousands of dollars.
The key is to be ready to make a move when the right time presents itself.
If you’re planning to buy a set of wheels in the near future, here’s a list of the best time to buy a car.
The best month of the year to buy a car is December;
Best time of the month to buy a car;
During the holidays;
Buy a car when there is high supply and short demand;
When you’re buying an old model car;
The best time to buy a car is when your finance is organized;
Buy a car when you have a good credit score.
Always seek professional advice before applying for a car loan.
The best time of the year to buy a car: December
December is the perfect and ideal time to buy a car, whether used or new, for several reasons. One reason is that car dealers are desperate to meet annual quotas at the end of the year.
If they can achieve their quotas, that usually means they will get a bonus. As they get closer to the end of the year, they are more willing to drop the prices.
They may even sell at a loss just to meet their quotas. As a buyer, this is a good opportunity to pitch a low price on a car a dealer has in stock.
Second, car dealers need to get rid of this year model for the new year model. As the new year is quickly approaching, car dealerships will start thinking about the new models.
And once they get into January and start taking delivery for the new-year models, they will do everything they can to get rid of last year model in December, including lowering their prices.
Need to buy a new car? Compare car loans with LendingTree.
There’s not too much competition in December among buyers. Another reason that December is the best time to buy a car is that there is less competition.
People tend to be more occupied with Christmas shopping and traveling to visit friends and family in December.
So that means fewer people are visiting car dealerships in December, making it harder for car dealers. That it turns make them more willing to lower the price of the car.
Car dealers have more competition among themselves in December. Because fewer people visit car dealership around this time, care dealers tend to fight with each other to make a sale.
As a buyer, if you receive a quote from one car dealer and threaten to go elsewhere, the car dealer will more likely give you a better deal.
For all of the reasons stated above, the month December is the best time to buy a car.
Supply and Demand
If there is a short supply for a particular car that you want and there is a high demand for it, 10 out of 10, it will not be on sale or discounted –regardless of the time of the year.
So, this would not be the best time to buy such a car.
On the other hand, if a car is unpopular and the supply for it exceeds demand, it will be more likely to be sold at a discount.
Comparing a range of car loans will help you identify the best one for you.
End of the month: best time to buy a car
The best time to buy a car is the last day or the last few days of the month.
As explained above, many car dealers have certain sale quotas to meet for the month. As the end of the month is approaching, they will review their numbers.
And if they are behind, they’ll be more likely to lower their prices. This is a good time for you to purchase your vehicle.
While December is the best time to buy a car, you may not have the time to wait for that long.
Indeed, one reason you’re buying a car might be for work or family commitments.
If that’s the case, you have other options. The holidays are some of the best time to buy a car.
Some of the months are the worst time of the year to buy a car. But holidays have great sales and offer great discount.
They’re the perfect time to buy a car. In fact, it’s common for car dealers to lower prices of their cars during holidays, such Memorial Day weekend, Labor Day, and Black Friday.
When it’s time to borrow money to buy a car, shop around. Don’t just go to your bank or agree to the car dealer’s in-house finance because it seems easy in the moment to do so. Compare and assess the finance options from a range of reputable lenders.
Best time of the week to buy a car
Timing is important when it comes to buying a car. But how do you know the best time of the week to buy a car. It’s simple. Avoid the weekend.
The key is to show up to the car dealership when there are fewer buyers. Fewer buyers than less competition.
Therefore, there is a low demand. So, shop for your car on a Monday, Tuesday or Wednesday when people are typically at work.
Those days tend to be the slowest. Therefore, you may be able to negotiate a more affordable deal.
Buy an this year car model
When a new car model is coming, sales of the this year car model will typically decline, simply because buyers prefer to wait for the new car model.
Demand therefore drops for this year model. And car dealers have no choice but to lower the price of the old model to make sure the old stock sells before the new stocks arrive.
As a buyer, this is an ideal time to buy your car.
When your finance is organized
The best time to buy a car is not whether you can get one on sale. Rather, it’s whether you are financially ready.
Yes you can a get car at a discount and save money along the way.
However, it can also be a costly mistake if your finance is not in shape.
For instance, you still have to think about the car loan payment you will pay every month. And if for some reason you can’t make these payments down the line, there’s the risk of a default.
In other words, being unable to repay your car loan could result in your car being seized and your credit profile being damaged.
So, the ideal time to buy a car is when you’re financially ready.
When you have a good credit score
You will need a good credit score in order to get approved for a car loan. Even if you can get a loan with a bad credit score, the interest will like be outrageous. So, request a free copy of your credit report.
If your credit score is bad, it may not be the best time to buy a car. It makes sense then to postpone on buying a car and take steps to raise your credit score.
The bottom line
Timing is an important factor to consider when to buy a car. In other words, the best time of the year, the month, the week to buy a car can make a big difference to your financial situation.
As you can see, the month of December is by far the best time to buy a car. But you shouldn’t be in a hurry to buy a car if you’re not ready or your financial situation is not in shape. Patience is key.
If you’re set on a particular car, then a car loan is going to be the next step. There are many options available. The key is to shop around and compare. By comparing different loan offers, you can pick the best one that will save you money.
Up Next in buying a car:
Work With A Financial Advisor Near You
If you have questions beyond the best time to buy a car you can talk to a financial advisor who can review your finances and help you reach your goals. Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
If you’ve been thinking about canceling a credit card, it’s critical to understand how it will affect your entire financial life. Laura covers 10 dos and don’ts for when to cancel a credit card that will help you minimize credit damage and improve your finances.
Laura Adams, MBA
June 17, 2020
12 Credit Myths and Truths You Should Know
The Connection Between Credit Cards and Your Credit
The only way to build credit is to have active credit accounts in your name and to use them responsibly over time. That’s where credit cards come into play.
One of the biggest factors in how credit scores are calculated is called your credit utilization ratio. It only applies to revolving accounts, such as credit cards and lines of credit, which don’t have a fixed term. Credit utilization isn’t measured for installment loans, such as mortgages and car loans, because they do have a set ending or maturity date.Credit utilization is a simple formula that equals your total account balance divided by your total credit limit. For example, if you have a credit card with a balance of $1,000 and a credit limit of $2,000, your utilization ratio is 50% ($1,000 / $2,000 = 0.50).
Keeping a low utilization, such as below 20%, is optimal for good credit.
Keeping a low utilization, such as below 20%, is optimal for good credit. So, by paying down your balance on the card to $400, you could reduce your utilization ratio to 20% ($400 / $2,000 = 0.20) and boost your credit scores.
A low utilization ratio says that you’re using credit responsibly. A high ratio indicates that you may be maxed out and even getting close to missing a payment.
Many people mistakenly believe that getting rid of their credit cards will automatically improve their credit. The surprising truth is that canceling credit cards usually hurts it because your available credit on the card plunges to zero, which instantly increases your utilization and causes your credit scores to drop right away.
However, whether closing a card is right for you really depends on your current and future financial situation. Use the following do and don’ts to know when ditching a card is best and how to do it with minimal damage to your credit.
RELATED: 5 Ways to Get a Loan With Bad Credit
10 dos and don’ts for when to cancel a credit card
1. Do cancel credit cards that are a net loss
If you’re like Maria and have great credit with an unused card that’s costing you money, you may want to consider canceling it. Many rewards cards come with an annual fee, especially when they offer cashback, airline miles, or points for merchandise. In some cases, using the rewards easily offsets the annual fee.
If you won’t use the card or can’t afford the annual fee, common sense should be the deciding factor, not your credit score.
However, if you won’t use the card or can’t afford the annual fee, common sense should be the deciding factor, not your credit score. However, one option is to replace a card that charges an annual fee with another card that doesn’t, ideally before you cancel the first one. That allows you to swap out one credit limit for another one and avoid any damage to your credit.
2. Do cancel credit cards that tempt you to overspend
I also don’t recommend keeping a credit card if it tempts you to overspend. Taking a temporary hit to your credit might be worth it to prevent bigger problems in your financial life.
3. Do cancel credit cards to simplify your financial life
If you’ve missed payments or can’t keep up with transactions because you have too many cards, it might be worth it to strategically cancel one or more credit cards. Keep reading for tips to minimize the potential damage to your credit.
4. Do cancel credit cards with low credit limits first
If you cancel a credit card, choosing one with a higher credit limit poses more of a threat than getting rid of one with a smaller limit. The lower your credit limit on a card, the less closing it could negatively affect your credit.
As I previously mentioned, for optimal credit, it’s best to never carry a balance that exceeds 20% of your available credit limit. If you’re not sure what your credit limits are, you can review them by getting a free copy of your credit report at annualcreditreport.com.
5. Do cancel credit cards you recently opened by mistake
A common credit dilemma is what to do after opening a new credit card that you felt pressured into at a retail store. Sales clerks make getting a huge discount with a new card signup sound too good to pass up. In some cases, you may not even realize that what you’re signing up for is a credit card.
If you’re loyal to a store and make frequent purchases there, having its branded credit card can give you nice savings and promotional benefits that make it worthwhile. While you can’t erase the card from your credit history, if you decide that you’d rather not have the account, closing it sooner rather than later is better for your credit.
Free Resource: Credit Score Survival Kit – a video tutorial, e-book, and audiobook to help build credit fast!
6. Don’t cancel your only credit card
In addition to maintaining low credit utilization, the health of your credit depends on having a mix of credit accounts. That shows you can handle different types of credit, such as installment loans and revolving accounts. But if you cancel your only credit card, that would leave you deficient in the revolving credit category.
It’s better to spread out your balances on multiple cards and maintain low utilization on each of them, rather than have one card that you charge to the limit.
Therefore, I don’t recommend canceling a credit card if it’s your only one. Having at least one card in the mix rounds out your credit file. Ideally, you would have a total of two or three cards that come from different issuers, such as Visa, Mastercard, American Express, or Discover.
If you have more than one line of credit or credit card, most credit scoring models calculate your utilization ratio for each account and collectively on all your accounts. So, it’s better to spread out your balances on multiple cards and maintain low utilization on each of them, rather than have one card that you charge to the limit.
Depending on the types of charges you make, you may need a low-rate card for times when you must carry a balance and a higher-rate rewards card for charges that you always pay off each month. No annual fee cards are best, but as I previously mentioned, rewards cards that come with a fee may be worth it.
7. Don’t cancel credit cards you’ve had for a long time
As if credit utilization and having a mix of credit accounts weren’t enough, a canceled credit card hurts your credit in other ways. Another factor that’s used in calculating credit scores is how long you’ve had credit accounts.
Having a long, rich credit history boosts your scores and makes you appear less risky to potential lenders and merchants. Canceling a long-standing credit card causes your average age of credit history to decrease, which hurts your credit. So, value credit cards that you’ve had for a long time more than those you’ve recently opened.
8. Don’t cancel multiple cards at the same time
If you have more than one credit card that you want to cancel, don’t shut them all down at the exact same time. It’s better to space out cancellations over time, such as one every six months, to minimize the damage to your credit health.
9. Don’t cancel credit cards if you’re planning to make a big purchase
If you’re planning to finance a big purchase, such as a home or vehicle, in the next three to six months, it’s not wise to cancel any credit cards. If your utilization rate increases and your credit scores suddenly take a dive during the application process, you may ruin your chances of getting a low-interest loan.
If you’re planning to finance a big purchase, such as a home or vehicle, in the next three to six months, it’s not wise to cancel any credit cards.
Maria didn’t mention if she’s looking to use her great credit to borrow money any time soon. But it’s an important issue that I recommend she consider.
10. Don’t cancel credit cards because you’ve made late payments
Never cancel a credit card with negative information, such as late payments or being in collections, thinking that it will disappear from your credit file. All credit accounts stay on your credit report for seven years from the date you became delinquent, even after you or a card issuer closes it. Accounts with only positive information remain in your credit file longer, for up to 10 years
What should you do with unused credit cards?
If you or Maria go through these dos and don’ts and decide that it’s better not to cancel a credit card, use it occasionally to make small purchases that you pay off in full. That keeps it active and allows you to continue adding positive information to your credit history.
However, I don’t recommend keeping a credit card that you’re not using responsibly or that tempts you to overspend. Taking a temporary hit to your credit might be worth it to prevent bigger problems in your financial life.
As of early 2020, student loan debt in the nation had reached more than $1.5 trillion. More than 44 million individuals have student loan debt, and the average person with student loans owes a bit over $32,000—which is more than half of the average household income in the United States. As a new school year approaches, more individuals are searching for ways to fund their education without going into debt for years. Luckily, student loans aren’t the only way to get help paying for college.
Learn more about student loans vs. financial aid below,
and get some information about various ways to help fund your education.
Student Loans vs. Financial Aid: What’s the Difference?
Both student loans and financial aid can come from the federal government or the private sector. The main difference between student loans and financial aid is whether or not you need to pay back the money you are given. Student loans generally require that you pay back the loan with interest, while financial aid packages like scholarships and grants typically do not need to be paid back.
That distinction can make a big difference. “Every dollar you receive in scholarship or grant form is a dollar you don’t have to pay interest on,” says Zina Kumok, an editor at Dollar Sprout. And saving that money opens up possibilities after graduation, too. “Students who don’t have to take out as many loans will have more career options and afford to start their own businesses, work in lower-paying fields, or even take time off to travel abroad.”
But as with any financial agreement, make sure you
understand the terms upfront before signing anything. Not all financial aid
comes without strings.
How to Apply for Financial Aid
To qualify for federal loans and other types of federal financial aid, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA). You might need to complete the FAFSA with some of your parents’ income information if you are still a dependent.
To apply for private loans and financial aid, you must
research the program in question and complete the appropriate application
process. For example, academic or extracurricular scholarships are often
offered by various colleges and universities. You’ll have to look on those
university websites or contact financial aid departments at various schools to
find out about how to apply to these programs. Scholarships offered by private
organizations will have their own processes as well.
Student loans provide credit extended to you or your parents for the purpose of paying for college. Student loans do have to be repaid, but typically not until you’re out of school. In some cases, such as if you’re going to work in certain public sectors, you might be able to apply for a student loan forgiveness program.
Subsidized and Unsubsidized Federal
When you apply with the FAFSA, you may find out you qualify for federal loans. Subsidized federal loans tend to have slightly better terms than unsubsidized loans. Another benefit of a subsidized loan is that the interest on it is covered by the Department of Education as long as you meet enrollment requirements. The amount you can borrow is limited, and interest rates range from 2.75 to 4.3%.
Learn more about federal student loans and economic protections from COVID-19: What You Need to Know about CARES, HEROES, and HEALS.
Private Student Loans
If you don’t qualify for federal student loans or want another option, you can apply for private student loans from commercial lenders. Whether you can get approved for these loans or get favorable terms and rates might depend on your credit score.
Don’t know your credit score? Sign up for ExtraCredit to find out.
takes many forms, and most often does not need to be paid back after you
graduate. These types of aid can be offered by your school, other private
institutions, or the government. They are most often divided into needs-based
aid and merit-based aid.
When applying for
any type of financial aid, you will need to research the deadlines,
requirements, and payment specifics carefully.
Be wary of scholarship and other aid programs that charge fees. “Fees are a dead giveaway of scholarship scams,” says Doug Whiteman, editor-in-chief at MoneyWise.com. “Be very careful about handing over a credit card number or other personal information.”
Scholarships are awarded for need or merit, and they’re offered by a wide range of organizations. Schools, private businesses, local and national associations, religious organizations, and charities are all potential sources for scholarships. Most scholarships do not require you to pay them back.
“Students should be more aggressive about applying for scholarships,” says Kumok. Whiteman agrees, citing a recent New York Times article that estimates there are 44,000 private scholarship programs. “The typical student probably has no idea that there’s so much money available,” he says. “Too often students and their families have seen student loans as an easy fallback, before they’ve fully explored scholarship and other financial aid possibilities.”
Grants are a type of financial aid that you typically don’t have to pay back. Federal and state governments offer grants, as do private and nonprofit organizations. Make sure to do ample research to ensure you get your application right, and pay attention to the grant terms. While many grants don’t have to be repaid, some do.
Be careful not to depend fully on grants, though. “Grants might not be available for the length of your degree program,” advises Anna Serio, a staff writer at Finder.com. “Some only cover the first year, while others are only available during the second, third, or fourth year of school. Even if a grant program covers all four years, you might have to reapply every year to be considered.”
Work-study jobs help you pay your way through school or
cover expenses. Some work-study jobs are paid internships, where you practice
skills and knowledge you’re learning in school or for your future career.
Others might simply be on-campus jobs in dining halls, fitness centers,
tutoring or writing centers, or other areas.
programs are best for students who want to build up their resume,” says Serio. “Work-study
makes it easier to land a job without experience or in a new field if you’re in
graduate school. Sometimes, work-study jobs can turn into a regular part-time
or even full-time position.”
If you pay qualifying expenses for school, you may be able to claim a certain amount as a tax credit to reduce your tax burden or even get a refund. The American Opportunity Credit, for example, allows up to $2,500 credit per eligible student, while the Lifetime Learning Credit allows qualified individuals to claim up to $2,000 for qualified education expenses per tax year.
State Aid Programs
Almost every state offers grants or other financial aid opportunities for college students. The National Association of Student Financial Aid Administrators provides a detailed list of state financial aid opportunities.
Schools may offer many of their own programs, but they
aren’t always well published. When you’re in the process of considering and
visiting schools, during the application process or even after you’ve been
accepted, make it a point to visit the financial aid office. School financial
aid officers can help ensure you’ve applied for all applicable financial aid.
Employer Education Assistance
If you’re already working, your employ might offer
funding for education. Some employers have programs that cover all or part of
the cost of degree programs if you agree to work for them for a certain amount
of time. Others pay for training seminars, workshops, and one-off classes that
are likely to make you a more valuable employee. Talk to your supervisor or human
resources department to find out if your employer offers such benefits.
Leave no stone unturned when seeking financial aid for
college. Numerous programs exist to help fund education for people in specific
For example, the Educational and Training Vouchers Program provides assistance to those who are or were in foster care. The National Health Service Corps Loan Repayment Program helps pay for student loans for those who work at Indian Health Services facilities. Be creative! The Tall Clubs International Foundation has a scholarship program for college women who are 5’10” tall and men who are at least 6’2”. Consider what makes you unique and look for scholarship opportunities that may reward you for it.
Did you know that there are also some tuition-free schools around the United States? Residents of certain states may qualify for free tuition programs. Be sure to do your research into these schools, as you would with any other. “The programs in the US often require you to work in exchange for your degree,” says Serio. “This can help you develop valuable skills and gives you a leg up entering the job market after you graduate.”
Get the Financial Aid You Need
If you need help paying for schooling, there are plenty of financial aid options available to you. Reach out to your school’s financial aid office for assistance and direction. If you’re interested in learning more about student loan options, you can look through our resource center for more information.
A credit card is a card issued by a financial company which enables the cardholder to borrow funds.
A rewards credit card offers one or more incentives for frequent use: When you use a rewards card to make purchases, you accumulate credits in proportion to the amount you spend. Rewards cards are hot right now: a recent Experian survey found that 45% of Americans who plan to apply for a new credit card want a rewards card.
In 2017, wholesale RV shipments reached their highest level ever, topping 500,000, according to the RV Industry Association. Part of the reason for the rise in demand for RVs is due to millennials, who are looking for ways to enjoy a mobile lifestyle by bringing home along with them.
If you’re interested in hitting the open road with an RV, you probably need a loan. After all, a recreational vehicle or motorhome is as expensive as a car — and even a house. Chances are, it will be difficult to save up enough to buy an RV outright with cash.
Here’s what you need to know about how to get an RV loan.
How does RV financing work?
Most RV loans are available for between 5 and 15 years, although you might also be able to finance for 20 years, depending on how expensive the RV is. If you go to a bank or credit union and ask to borrow money for an RV, you might be subject to greater scrutiny.
The reality is that recreational vehicles are considered luxury items, and some RVs depreciate rapidly, much like cars. As a result, RV loans can be more difficult to obtain, especially without good credit and a large down payment.
Motorhome and RV Financing Options
When it comes to RV financing, several different types of lenders offer RV loans. To make sure you get the lowest interest rate and best loan terms, you will want to compare options from multiple lenders.
RV dealers, banks, credit unions, and online lenders all offer RV loans. Below, we will dive deeper into each of these options.
Financing an RV Through a Dealer
Many dealers offer RV financing and it can sometimes be easier to just do everything at the dealer. Sometimes the RV dealer can even offer the best loan options. Depending on the situation, you might have access to special promotions and pricing when going through a dealer.
Use the RV dealer in your comparison shopping scenarios. Visit your bank or credit union and get pre-approved for an RV loan before you start visiting dealers. You can use your pre-approval letter as leverage when you bargain on loan terms.
Additionally, it can make sense to visit other RV dealers and even look online if you can. RV shopping is similar to car shopping in that you want to show different dealers what offers you’re receiving from others. This can help you get a better price on your RV, plus get you better financing options, especially if you have good credit.
Banks or Credit Unions
Getting pre-approval from a bank or credit union can also provide you with more choices when shopping for an RV. You can look at private-party RVs, rather than focus only on what’s in a dealer’s lot. Make sure you weigh all the options before moving forward with an RV purchase at a dealer (and using dealer financing).
If you don’t have the credit or income to qualify for a dealership or recreational loan, another option is a personal loan. It’s easier to qualify for this type of loan, but it may not cover your RV purchase as most lenders have a maximum loan amount of $35,000 to $100,000.
Some lenders offer personal loans for borrowers with bad credit, with credit scores as low as 580. However, these loans also come with higher interest rates.
How much can you afford?
Before you start shopping around for RV loans, you need to know exactly how much you can afford. Just like making any other major purchase, you want to be sure you can handle monthly payments.
Carefully consider the following factors as you decide how much RV you can afford:
Income and cash flow: Think about your income and cash flow. How will you make your RV payments? Do you have enough income to make your monthly payments with ease? What might you have to give up to keep your cash flow smooth?
Living situation: Consider your reason for buying an RV. If you plan to buy the RV as a supplement to your situation, using it only for vacations, you might not be able to afford an expensive RV. On the other hand, if you plan to use the RV to replace your current housing, you might be able to handle a bigger, more expensive RV because you won’t be making rent or mortgage payments.
Current debt level: Before you go into debt for an RV, consider your other obligations. Do you have other debts taking a chunk of your cash flow? If so, it might make more sense to pay down some of your other loans before taking on RV debt.
Only get an RV loan if it makes sense for your situation and if you can afford it. And if you do finance, make sure you only borrow what you can afford. That might mean getting a smaller RV so you aren’t borrowing more than you can handle.
How to Qualify for the Best RV Loan Rates
Getting a good rate on an RV loan is important if you want to save money overall on your debt. Lenders will consider different factors when deciding what interest rate to offer you.
Market factors impact the interest rates you can get on an RV loan. You can get a pretty good idea of what RV loan rates are doing by looking at car loan rates. Additionally, you can also watch Federal Reserve benchmark rates and consider overall credit conditions to get an idea of which way the wind is blowing.
Your Credit Score
While market factors influence interest rates, personal factors also go into determining your RV loan APR (annual percentage rate). As with almost any other loan, your credit score is going to make a big difference. If you want to get the best offer, improve your credit score before applying for an RV loan.
It’s possible to find RV loans with bad credit, but they are few and far between — and you have to be prepared to pay much more in interest over the life of the loan.
Your Down Payment
Lenders will also look at your down payment when quoting you a loan rate. For many consumers, it’s a good idea to put down at least 10% of the purchase price. However, some lenders might ask for more — and others will actually finance 100% of the cost of the RV.
The bigger your down payment, though, the lower your RV loan interest rate will be. If you plan to live in your RV and you currently own a home, you can see a big reduction in what you pay in the long run by selling your home and using a portion of the profits for a down payment.
With a bigger down payment, not only can you save on interest, but you also end up with a smaller loan, so your monthly payments are likely to be smaller.
Don’t forget to shop around for the best deal on your RV loan. Check out both new and used RVs. Get quotes from two or three lenders before making your decision. You can also use a loan calculator to compare interest rates, terms, and fees. Then, choose the RV loan that works best for your situation.
Types of RVs and Motorhomes
Choosing the right RV depends on how you intend to use it. If you plan on using it for a few week-long or weekend trips per year, you may want to consider something smaller and less expensive. However, if you’re planning on living in it, you may want something bigger and more expensive.
Here are the are four main types of RVs and motorhomes:
Class A: The largest and most expensive RVs on the road. A great choice for full-time, dedicated travelers.
Class B: Often referred to as the camper vans, Class B recreational vehicles are easier to drive and much less expensive than Class A’s.
Class C: Midsized RVs that range from 23 to 36 feet. Class C campers have extra sleeping space or storage area above the driver’s cab. They’re usually a little more expensive than Class B’s.
Travel trailers: A travel trailer is an RV that is towed by a truck, van, or SUV that can handle the weight capacity and are usually cheaper than the others.
Other types of RVs include popup campers, teardrop trailers, hybrid trailers, and fifth-wheel trailers.
Do your research before you purchase an RV. Make sure it’s what you really want before you move forward, and shop around. Don’t forget to make efforts to improve your credit score ahead of time and save up for a down payment to reduce the amount of debt you end up with.
A recreational vehicle can be a great way to live and see the country. Just make sure you only buy what you can afford and finance as little as you can get away with.
Personal loans are typically unsecured loans offering up to $50,000 with a term of up to 5 years. They come in several shapes and sizes and interest rates, fees, and terms can differ greatly, but the average personal loan in the United States is between $7,000 and $8,000 and charged at a rate of 11% and 12%.
Get approved fast for a Personal Loan!
Compare multiple loan options from the nation’s top lenders.
Attention: Still Open During the Financial Crisis…
Tip: Apply now to see if you qualify for a personal loan today!
Steps to Getting a Personal Loan
Check Your Credit Report
Compare Rates and Terms
Get a Pre-Qualification
Look at the Fine Print
Look at Alternative Options
Receive Final Approval
1. Check Your Credit Report
The better your credit score is, the lower the interest rate of the loan will be. You can get a free credit check from all three of the main credit bureaus (TransUnion, Experian, Equifax) once a year and use this to see what the lenders will see.
Your credit report will show your credit history in intricate detail, as well as your personal details and all active accounts. If your credit score is below 600, you’ll likely be refused a personal loan; if it’s lower than 700, you may succeed, but won’t necessarily get the best rate.
In any case, it always helps to build your credit score and it’s also very easy to do. If you follow the steps below, you may see a sizeable improvement in a few short months:
Increase Credit Limits: Your credit utilization ratio calculates your debt in relation to your credit limits. Someone with a debt of $100,000 is not necessarily worse off than someone with debt of $10,000 if the former has a credit limit of $2 million and the latter has a credit limit of $20,000. By judging debt in this way, your credit score builds an accurate and relative picture of your financial situation. By increasing your credit limits, you can improve this part of your credit score in one quick move.
Payoff Debt: Debt is the other half of the credit utilization ratio and works just as well as increasing your credit limit. If you have a debt of $5,000 and a credit limit of $10,000, your credit utilization is a high 50%. If you repay just $1,000 and increase your credit limit by $1,000, this ratio drops to a respectable 36%.
Get a Secured Credit Card: A secured credit card uses a security deposit as collateral, allowing you to sign-up even if you have very bad credit or no credit at all. It can build your credit in as little as 6 months as all payments are reported to the credit bureaus. Your deposit will set your credit limit and is completely refundable.
Stop Applying: Every time you apply for a new auto loan, personal loan, credit card or mortgage, you receive a hard credit inquiry, which can reduce your FICO credit score by between 2 and 5 points. What’s more, every new account will reduce your score even more and make it harder to quickly build a strong score. Keep applications to a minimum and only apply when you absolutely need a new account.
Keep Making Payments: Your payment history accounts for 35% of your FICO credit score, which is more than anything else. It takes a long time to build your score this way, but as soon as you miss a payment, your score can drop by over 100 points and undo all your hard work, while making your task considerably harder.
At the same time, however, your credit score is not the only thing that matters. There is a misconception here, one that claims you can get pretty much anything you want as long as you have an excellent credit card. But that’s simply not the case.
If you are self-employed with an inconsistent income that never goes higher than $15,000 a year, it’s still possible to have an excellent credit score. After all, as long as you keep credit applications to a minimum, meet your payment obligations on time and keep a strong credit utilization ratio, you can build a great credit score.
But does that mean you’ll be offered a $200,000 mortgage or a $50,000 personal loan? Of course not. You’re not making enough money to cover those debts. You might be offered a low limit credit card with relative ease, but you’ll struggle to get a sizeable personal loan and may be refused outright.
2. Compare Rates and Terms
An estimated rate is, as the name suggests, just an estimate. It can vary greatly depending on your credit score, income, and a few other factors. However, your eventual rate will always fall into the estimated range and by looking for the best ranges and comparing the most likely rate based on your current credit score, you can avoid wasting your time on high interest loans.
Many borrowers will look for the lender they are most familiar with, including the ones they have a bank account or mortgage with. But your checking account is irrelevant here and by skipping the comparison shopping you could end up with a much higher rate than you can afford.
Look for the cheapest rates and compare these to the best loan amounts. Calculate how much you will need and whether or not you can sacrifice a few dollars here and there to save more on interest.
3. Get a Pre-Qualification
A pre-qualification will give you an idea of what sort of loan you can get based on your credit score and income. You can then use this information to compare and contrast, ensuring you find the best and most suitable loan for you.
You will need to supply all of the following information, and this will be used to determine if you’re a good fit or not:
Your Social Security Number
Your full income and debts (debt-to-income ratio)
Your date of birth, home address, phone number, and email
All your previous addresses dating back a fixed number of years
Details of your education
If your income is too low, your debt-to-income ratio is too high, your credit score is poor or you have made too many credit applications, you may be refused a pre-qualification.
4. Look at the Fine Print
Does the loan have a prepayment penalty? Does it charge high fees and penalty rates? Is there an origination fee? This information may not be included on the main offer page, but it’s essential for determining the worth of a loan, so dig around in the terms and conditions, and make sure you’re getting the best loan possible in terms of the lowest rate as well as the lowest fees.
5. Look at Alternative Options
A personal loan is not the only option at your disposal, and it may not even be the best one. Depending on what you need the money for, there are a host of better alternatives out there, ones that may be more forgiving of your credit score and more willing to give you a large sum and a low rate.
It’s not all about banks. There are online lenders, credit unions, and a host of other financial institutions willing to help you out.
We have outlined some of the best alternative options a little further down this article.
6. Receive Final Approval
Once you have browsed multiple loan offers, checked loan rates, and decided on the best option for you, it’s time to apply and get final approval. You will need to provide some additional info, including W-2 forms and pay stubs, and then the lender will check your credit score and you’ll receive a hit of between 2 and 5 points.
If there are no issues, the loan will be finalized. Some online lenders offer to pay your funds by the next business day and other lenders offer instant payment on acceptance of the loan application. However, many will pay within 1 week.
What are Personal Loans Used For?
You can use a personal loan for a variety of reasons and in most cases, the lender doesn’t care which one you choose. As long as you meet the monthly payments and have a respectable credit score, they don’t care if you’re blowing it on a vacation or launching a business. Here are a few reasons to apply for a personal loan, some of which make more sense than others.
If you have a lot of credit card debt, you can use an unsecured personal loan to clear it. You’ll still have debt, as you’re essentially swapping one debt for another, but you may be charged a lower interest rate or smaller monthly payment.
There are debt consolidation and debt management companies that specialize in this service and can do all the hard work for you. However, these companies focus mainly on reducing your monthly payment and interest rate in exchange for a prolonged-term. You’ll pay less per month and may have an APR that is several points lower, but the increased term means you will pay much more over the length of the loan.
If you have a strong credit score, are in a good financial position and have several high interest credit card debts, you can get a low rate, short-term loan. You’ll pay more per month, but over the term, you could save thousands of dollars in interest payments.
It’s rarely a good idea to accumulate debt just so you can enjoy the vacation of a lifetime. But what if it’s the only chance you have of taking that vacation? What if it would be a life goal realized and you’re confident that you can make the monthly payments and eventually clear the debt?
In such cases, while we would never recommend it, using a personal loan for a vacation is understandable. It’s something that many older married couples do to pay for cruises and trips across Europe. It’s also a method used by young married couples to have the honeymoon they have always dreamed of.
Student loans aren’t always readily available, nor are they the best option. And while they are usually more preferable to personal loans, they may not provide the coverage that you or your grandchildren need.
In the last decade or so, there has been an over 1,000% increase in the number of senior student loan borrowers. This isn’t the result of an influx of mature learners, but rather it’s because they are assuming debts on behalf of their grandchildren and children, co-signing to help them through college.
Pay for a Major Expense
Life can throw several major and unexpected expenses your way, and if you don’t have any money in your savings, a personal loan may be your only option. Many couples live their lives relatively debt and problem-free until one of the following expenses raises its head and they opt for a personal loan.
Marriage: A marriage is not something that happens unexpectedly, unless you’re a parent and your child is the one getting married. In either case, it’s a massive expense that can cripple you financially, with the average wedding costing over $30,000.
Adoption: The average cost of adoption in the United States ranges from between $40,000 and $50,000. Like a wedding, it’s not necessarily something that happens unexpectedly, but also like a wedding, when the time is right and the need is there, it’s something you feel like you have to do.
Funeral: Funerals can cost upwards of $10,000 and often occur out of the blue. If the deceased is insured or has assets, it’s not a problem, but there are countless people who are not insured, don’t have assets, and die unexpectedly. If you’re the closest person to them, you may find yourself assuming responsibility for their funeral.
Medical Services: If you fall ill and need a specific type of treatment or surgery that your insurance won’t cover, a personal loan could be the only option. Medical treatments are very expensive, and many Americans simply can’t afford to cover these costs out of their own pockets.
Launch a Business
Launching a business is another risky way to use a personal loan, but one that many borrowers are submitting to every year. This is the golden age of entrepreneurs, and there has never been a better time to launch a business.
Of course, grants and business loans are also available, but the former often requires you to work in specific niches and abide by specific terms, while the latter will be weighed against your personal finances if your business is small or new. A personal loan, therefore, may be the only option for business owners seeking to launch a new project.
Alternative Options to Personal Loans
A personal loan isn’t your only option when you need a little cash. You can borrow money through several different avenues, and the best option for you will depend on what you’re using the money for:
You need credit to build credit; you need a credit card or a loan before you can get the FICO score you need to get a credit card or a loan. It can feel like a Catch-22 situation, but it’s not as complicated as it might initially appear.
If you have no credit or bad credit, you may be offered a super high interest rate loan or credit card and that can help you to build a respectable score. However, it’s a risky way to do it and there are many better options out there if your only goal is to build credit.
For loans, you can use something known as a credit builder loan. Much like a reverse loan, a credit builder loan requires you to complete many of the same steps as a traditional loan, only the lender keeps the lump sum amount and moves it to a secured account.
That loan payment earns you a small rate of interest and this helps to offset some of the interest you pay the lender. Every month, you make a payment on the loan, paying some of the principal in addition to the monthly interest, and the lender will report your payments to the three major credit bureaus (TransUnion, Experian, Equifax).
Every month, your score will improve slightly as your payment history receives a boost and then, at the end of the term, they’ll release the lump sum to you, and you’ll get most of your money back (minus the interest) in addition to the credit score boost.
Paying Off Debt
A personal loan is a great way to clear debt, but it’s not necessarily the best option. If you’re struggling to meet your monthly payment obligations, it’s not the right option at all, as your monthly payments will increase as your term decreases.
Instead, you can look into the following options:
Debt Payoff: Sometimes, simple debt payoff strategies like the Debt Avalanche and the Debt Snowball are enough to clear your debt and can do so in a way that won’t cost you dearly or damage your credit score.
Debt Settlement: One of the best and cheapest ways to clear credit card debts, debt settlement works by agreeing reduced settlement amounts with your creditors.
Debt Management: A form of debt consolidation performed by a specialist credit counselor. You will pay less every month and can receive greatly improved terms.
Launching a Business
Once you’ve cut costs, reduced expenses, and considered all possible ways to reduce your initial outlay for a business launch, then it might be time to consider crowdfunding. Sites like Kickstarter can help you to get the funds you need and if you have a good idea or product, along with perks, it can give you capital.
You can also sell shares in your business to friends and family, or simply ask them for a small loan.
Expanding a Business
One of the best loan options for expanding your business is something known as PayPal Working Capital, a program that we have touched upon and praised several times before. If you accept PayPal for your business and have processed many payments through your PayPal account, you’ll be offered a lump sum to help you grow.
The loan amount you’re offered will depend on how much money you receive every month. As for the repayment term, you need to pay 10% of the total every 90 days, and all payments are taken as a percentage of your income. If you opt for $20,000, you may pay a fee of $2,000, taking the total to $22,000, and be asked to pay $2,200 every 90 days for a 20% cut.
This means that for every $1,000 you earn, you’ll pay $200 back to your PayPal Working Capital loan, in addition to the usual PayPal fees. The application process is quick and easy, and you can have the money in your PayPal account in just a few minutes.
Paying for Education
While a personal loan can be a useful option when paying for your education or a family member’s education, student loans often provide better rates and loan terms. They can also cover most of the costs associated with college, although if you need extra money for living costs, then a personal loan can be considered.
Paying for Vacations or Other Expenses
If you are a homeowner and have built substantial equity in your home, then a home equity loan or home equity line of credit may provide you with better loan terms and a much higher loan amount.
A home equity loan or line of credit is a secured loan, as it uses your home as collateral. If you fail to make the payments every month and eventually default on your loan, the lender can simply take your asset and use it to recover the costs of the loan.
As a result, the annual percentage rate is often much lower. You will still need good credit and a respectable debt-to-income ratio to apply, but the best home equity loan is typically much more favorable and cheaper than the best personal loan.
Are you wondering if there are personal loans for fair credit out there?
If you are, then the answer is a resounding “Yes.” There are, indeed, personal loans for fair credit available to you.
If you have fair credit, expect your credit history to be under the microscope by lenders when applying for a personal loan. But that shouldn’t stop you from getting a personal loan.
So, how do you get a personal loan when you have a fair or average credit?
While you may have fewer options, the best way to know for sure what’s available to you is to shop around and compare.
In other words, there are lenders that are willing to get you a personal loan even if your credit is simply average. You just have to know where to look.
A simple internet search of “personal loans for fair credit” can return thousands of results. That can be overwhelming to go through everything.
But don’t worry.
This guide will provide you a selection of the best personal loans for fair credit. It will also show you ways to fix a fair credit score to a good or excellent credit score.
What is a fair credit score for purposes of getting a personal loan?
Before we offer you a list of personal loans for fair credit, you need to know what a fair credit score is.
A fair credit score, according to Credit Sesame, is a credit score within the range of 640 and 680. It sits “between bad and good credit.”
With an average credit score in the mid 600’s, you more likely to get a personal loan than those who have a poor or bad credit score (which usually ranges between 300 to 600).
But you will not enjoy the same interest rate that someone with an excellent credit score would.
Great interest rates are reserved for people with excellent credit score.
What is a personal loan and what can it be used for?
A personal loan is a lump sum of money you borrow from an institution, and then repay that amount (with interest) over a set period of time.
There are two types of personal loans: secured and unsecured. For example, if you’re taking a personal loan to pay off credit card debts or to go on a vacation, that loan is an unsecured debt.
On the other hand, if you’re taking a personal loan to finance a car, you’ve taken a secured loan that is guaranteed by collateral, which is the car your purchase.
Unsecured loans have more risks for lenders, because there is no collateral. So, they have to rely solely on your credit history and other aspects of your financial life. That’s why it may be harder to get qualified for an unsecured personal loan with bad or fair credit.
Can I get a personal loan with a fair credit?
The answer is “yes.”
While there are plenty of personal loans for fair credit out there, it’s not always the best idea to apply. One reason is that you’ll often be charged a higher interest rate than someone with a good or excellent credit score.
In that case, it could be worth raising your credit score first before applying for a personal loan.
So while there are lenders who are willing to offer personal loans to people with fair credit if you’re struggling to get approved for a personal loan with a fair credit, you may want to consider improving your credit score first.
Click to get approved for a personal loan now
5 Best Personal Loans for Fair Credit
The better your credit score, generally the higher your chance is for getting approved for a personal loan.
If you’ve got an average credit, you may still get a loan but you will get a high interest rate.
Check out the list below to see some personal loans you may be eligible for.
Part of your search for the best personal loans for fair credit should start with LendingTree.
That is because LendingTree is not a direct lender of personal loans, but instead it’s an online marketplace that matches borrowers to lenders based on your individual qualifications.
It saves you time. Instead of applying to several lenders, with LendingTree you can shop around and compare the best personal loans on one website. It’s an all-in-one platform.
It just connects you with multiple lenders, you can get a personal loan with even a 600 credit score.
Avant targets people with bad and fair credit. So, that means even if you have a credit score as low as 580, you may still get qualified for a personal loan. The loan amount ranges from $2,000 to $35,000.
Plus, Avant provides quick funding for personal loans.
Just like Lendingtree.com, BadCreditLoans.com is another online lending network that connects you to a huge selection of lenders.
These lenders specialize in lending personal loans to people with bad or fair credit. You can get a personal loan from up to $5,000.
Payoff provides loans to borrowers who have a tons of credit card debts. If you have high interest credit card debts, a Payoff loan can help you consolidate them.
While you can get a Payoff personal loan with fair credit, the minimum credit score is around 640, which is on the higher end of a fair credit score.
So if you have a less-than-stellar credit, you may postpone your personal loan application.
Another peer-to-peer lender to get a personal loan with fair credit is Prosper. With Prosper, not only can you get loan approval the same day, you can also get funding the same day.
But the main downside is that Prosper requires a minimum credit score of 640, which is on the higher end of a fair credit score range.
Other ways to find personal loans for fair credit
When you’re applying for a personal loan, don’t underestimate banks. The options above are online lenders. But banks and credit unions do provide personal loans to people with an average credit.
This includes all the major banks, such as Chase, Wells Fargo, Citibank, Bank of America, plus other small banks.
The main benefit of visiting a bank when applying for a personal loan, especially with a fair credit, is that you get to speak with a human being and has the opportunity to explain your financial situation.
For example, you might be able to explain that the reason for an average credit score is due to an unexpected medical bill.
That is not possible with online lenders where it is an automated system that’s reviewing your finances.
It’s even better to get approved for a personal loan even with a fair credit if you have an account with that bank. They can see your transaction history.
The disadvantage, however, is that a bank may not offer the most competitive personal loan rate, especially with a fair credit.
Part of your search for a personal loan with fair credit should also include credit unions.
Credit unions are not for profit organizations and are more willing to approve you.
But to get access to the best rate, you’ll have to become a member.
Peer-to-peer (P2P) Lenders
Another alternative to banks and credit unions, P2P lenders can provide you with a personal loan even if your credit is average.
For example, LendingClub, a popular P2P, can get you a personal loan with a credit score as low as 600 — which is considered fair credit.
However, your rate may not be as competitive.
Tips to fix a fair credit if you can’t get a personal loan
Holding off applying for a personal loan to improve your fair credit to an excellent one is a good idea.
Not only will you get qualified, but you’ll also get a better interest rate.
Follow these tips to improve your credit score.
1. Get a copy of your credit report
The first step is to obtain a copy of your credit report.
The three main ones to get it from are Transunion, Equifax, and Experian.
By law, you can request a credit report once every 12 months.
But if you want to do so more frequently, you can request it from free credit monitoring services such as Credit Sesame or Credit Karma.
2. Make sure there aren’t any mistakes
Once you get a free copy of your report, make sure there aren’t any inaccurate information or listings.
If you find something that you’re not familiar with, dispute it immediately.
Sometimes it can be a harmless mistake such as a misspelling or an issue that has already been resolved. Some other times, it can be something more serious such as a credit card or a loan taking out in your name.
So it’s important to always check so you’re not a victim of identity fraud.
3. Pay off any credit card debts
Some debts like student loans (as long as you’re not in default) may not have an impact on your credit score.
But if you have outstanding credit card debts, make it a priority to pay them off.
Or at the very least, pay them down until your balance is at or below 30%. That’s called “credit utilization rate,” which is a big factor in calculating your credit score.
4. Pay your bills on time
Nothing will tarnish your credit score like late payments. That is because payment history accounts for 35% of your total credit score.
Before a lender can provide you with a personal loan, (whether you have fair credit or not) they look at your entire credit history.
A late payment history does not look good. It tells them that you’re not responsible with your money.
So make an effort to pay your bill on time, even if you can only make the minimum payment.
5. Don’t apply for new credit
When you’re improving a fair credit to good credit in order to get a personal loan, the last thing you want to do is to apply for new credit.
That’s because each time you do, you rack up what’s called a “hard inquiry.” Each hard inquiry is recorded on your report. And hard inquiry accounts for 30% of your credit score.
One hard inquiry is nothing to worry about. But when you make several within a short amount of time, you’ll hurt your credit score. It also tells lenders that you are desperate for credit.
Consider a co-signer
While it makes sense to raise your credit score before applying for a personal loan, sometimes you just need the money right away.
If that’s the case and can’t get approved on your own, then you will need to use a co-signer with good credit.
With a fair credit, using a co-signer should be able to get you qualified for a personal loan.
But, bear in mind that this is a big financial burden you’re putting on them. By accepting to co-sign a loan, they are also responsible to pay off the loan if you cannot. So don’t take it personal if they say “no.”
Can I get a personal loan with fair credit? The answer is “yes.” Personal loans for fair credit are available. And the list above have the best personal loans if you have fair credit.While there are several personal loans for fair credit, it’s not always the best idea as you will often charged a higher interest rate and fees. In this case, it makes sense to improve your credit score first before applying.
Click to get approved for a personal loan now
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