Personal loans from established financial institutions are a great way to consolidate debt. One of the most important indicators of credit is just how much of your available credit you’re actually using.
For instance, if you have 4 credit cards and the collective credit limit is $5000, and you are using 75% of the available credit on each card… that doesn’t look so good on your credit report. A good credit profile would show you using about 33% or less on each of those 4 cards.
Now, the interesting thing here, is that a $3,750 loan with a fixed payment over a set number of years, looks better on your credit than the same amount spread out over 4 credit cards where 75% of available credit is being used.
The bottom line here, is that if you are in that 4 credit card situation I’m describing, and 50%-75% of the available credit on each card is being used, you might do better obtaining a personal loan for debt consolidation. If you reduce the percentage of your credit card usage… even if your total debt remains the same… your credit score will go up.
Now, I know that might sound silly, but how your available credit is distributed is vitally important. Let’s say you are in the situation as described above, and you re-finance your debt into a 5 or 3 year personal loan. Your interest rate on the debt may go up. BUT… your available credit now jumps to include all of the credit available on those cards… and that is 100%.
Credit reporting bureaus are funny things, and that situation looks better to them than the one you started out with!
So … how do we find these types of loans?
The best way to get a loan that you will be able to repay is to go and shop around for the best deal. Shopping around does not mean you have to have your hand on the financial till at all times. You need to find out what other people are getting and the money they are paying for their loans. Do you want to get in touch with a loan specialist? Someone you might know in the lending industry and have dealt with before? Or, do you want to search for a lender who can help you get a great deal?
It is obvious that the the simplest way of finding the best deals is by shopping online when looking for loans. When searching online you will get all the information you need at your fingertips before you have to start answering all the specific questions about income… debt… etc.. On these site you can just sign up and they will let you log in to see how much money you have available to get a loan. Sites like Credit Karma can be a big help, and assist you with shopping for the best personal loans available. (Personal note: No affiliate link here… just some good advice.)
Even though you may be able to find some individual lenders who will help you get a loan, you will still have to make some inquiries before you can finalize the deal. Once you are happy with the loan terms and conditions, you will be able to see exactly how much money you will be able to borrow.
You should always take time to search for the best loans so that you can avoid future problems. There are many types of loans and you should not take any decision lightly, as this could affect your credit score negatively.
The only time you should consider borrowing money is when you have a cash flow that needs to be met, and by that I mean you should consider applying for payday loans, low-interest loans, and cash advances. You should also check out the different types of loans that can be applied for, including personal loans and unsecured loans. In general, “Payday Loans” are a bad idea because of their high interest rates. “Personal Loans” can also have high rates, but their longer terms and full amortization can be an advantage.
While looking for the best deals online, you will want to make sure that you compare all the different types of loans, and the interest rates on each loan will vary. You will also want to make sure that you do not only compare one type of loan, as there are so many types that you should compare.
For example, with cash advances and other small loans, you will be required to deposit some sort of collateral in order to receive the loan. The collateral can be anything from your home, car, or a piece of jewelry, but the fact is that you will have to place the risk that you are going to default on the loan on the collateral.
This is why it is important to keep in mind that cash advances are the worst type of loans. By taking a loan that has high rates of interest and other fees on top of it, you are setting yourself up for problems if you do end up defaulting on the loan. If you can find an unsecured loan, it is better to take that at a high interest rate, than a loan secured on… well, say, your home, for instance… at a lower interest rate. As always, you need to intelligently balance the risk vs the reward.
As previously mentioned, many people will use their cash advances as a means of a short term solution to their cash flow problems when they really have more serious credit problems. The result can be that if they have trouble meeting their repayments, they might not be able to dig themselves out of an insurmountable hole.
Another thing to think about is that when you apply for a personal loan you are setting yourself up for further problems with this money later on. You will have to pay back the money you borrowed on time. This will mean a deadline, and if you don’t make it, it will mean a hit to your credit rating, meaning that you will have to pay even more interest for your loans in the future. Not every “black mark” we receive on our credit wipes us out completely. Most simply reduce our ability to finance things in the future. So, a missed payment on a personal loan may mean that, in the future, lenders will only deal with us at higher interest rates or lower loand amounts.
There are many types of loans out there, and you will want to choose wisely. By choosing the best type of loan for your situation, you will ensure that you are able to get the best deal, and preserve your credit. As long as you do not overspend, you will be able to get the best deal on your loans so that you can handle your debts in the best possible way.
Steve Gaghagen is an actor, vocalist, director, writer … and “Recovering” Realtor! Over the last several years he’s become a successful Internet and Network Marketer. Steve works from his home in glorious Big Bear Lake, California, and spends much of his time with his 3 dogs, Roxie, Cuinn, and Toby.