@ozella_schumm Putting your loan to work may seem like a wise financial decision, but taking out a personal loan can have long-term and short-term effects. Lenders see it as an investment and are interested in seeing how much risk they’re putting behind it. When you borrow money from a third party, you’re making that loan unsecured: It doesn’t require your signature to repay it. But lenders view it as an investment and want to ensure they’re getting the best return on their money. They monitor the credit score of prospective borrowers to see if they have accurate credit records. They may ask you questions about your past credit history to ensure that you aren’t trying to swipe any loans. Lenders also monitor how likely you are to repay the loan. If your loan score is below acceptable levels, this could affect your ability to get future loans from other parties and result in higher interest rates. The implications of personal loans for your credit score are many and varied.
There are many cases where you may need a personal loan, but you’re not able to get a cosigner. In such cases, you can apply for a secured personal loan, which is the type that requires your signature and credit score. Here are some steps you must follow when applying for a secured personal loan: Determine your credit score by getting your free credit report from annualcreditreport.com or another site. You’ll want to make sure that lenders see this as an investment and not one that could negatively impact your future credit scores. Get pre-approved for the amount of money you need by going through an online lender like Lending Club or Prosper, where they can see how much money you have available to borrow and how much debt you currently have. Suppose you have more than $10,000 available savings to put towards the borrowed amount. In that case, you can qualify for a higher interest rate if lenders see this as an investment opportunity (as opposed to someone who will be trying to leverage their resources).
Your loan may not be the best option for you at the time, but that doesn’t mean you should give up on using it to help you with your financial needs in the future. Just because lenders aren’t interested in your loan doesn’t mean that you shouldn’t take advantage of other resources, like an emergency fund and prepaid credit cards.