You need money and you need it fast. It happens to everyone from time to time. If you have good credit score then you will be fine.
Whether you need to buy a house or have fallen on hard times, most people need a loan at some point in their lives. Don't feel ashamed of it or avoid like the plague.
You do need to know your options when it comes to what type of loan you need. Learning about credit and how to improve your score is also crucial.
Want to learn how to boost your credit score and get a loan at a better rate?
Read on to learn the best ways to borrow money through good credit loans 101.
Good Credit Loans 101
If you are seeking personal loans for good credit then first "good credit" needs a definition. The term gets thrown around a lot so it helps to have some exact numbers.
The Motley Fool defines good credit as having a FICO score between 690 and 719. An excellent credit score is between 720 and 850.
Credit scores get monitored by the three major credit bureaus in the US. These bureaus are Equifax, Transunion and Experian.
The Balance says that there are many things you can do to improve your credit score. These include:
- Paying all bills on time
- Reduce credit card balances
- Maintain old credit card accounts
- Manage debt
- Do not apply to more credit cards
- Track credit reports
- Lower credit score inquiries
That last one is a little tricky. While you want to know your credit score, it can actually work against you to have your credit checked too often. Keep that in mind if you are looking for loans from many sources at once.
Low Interest Credit Cards
There are plenty of credit card companies that would love to approve you for a card. They are also happy to raise your credit limit or give you a loan.
You can usually get at least one credit card regardless of your credit.
Using a credit card responsibility is very important to building your credit score. Proving to the credit bureaus that you can borrow money and pay it back on time each month helps a lot.
You can usually get at least a few thousand dollars out of each credit card. It's not advisable to take out too many credit cards, max them out or pay the smallest amount each month though. The interest rates can add up, even if you are using a great credit card. “Understand as well the implications of 0% APR introductory balances once the introductory period goes up. We see many folks that unfortunately need debt relief because the minimum payments are not manageable when the introductory period ends.” says Ben Tejes of Ascend Finance.
Bank Or Credit Union Loan
Going to your local bank or credit union is an obvious choice for requesting a loan. You will need a decent or good credit score for personal loan approval at a bank.
Banks and credit unions have strict rules when it comes to who they can approve for loans. Lending to high risk individuals can end up backfiring on them.
This comes after big bank meltdowns and the mortgage crisis of 2008. Banks were approving too many risky loans and several of them didn't make it out alive to survive into 2024.
Having a good credit rating will increase the amount they can loan you. It will at least get you approved for what you need. A great credit rating can improve the terms of the loan. These include interest rate, collateral and payment schedule.
Private Lender
Private lenders are individuals, companies, or non-banking financial institutions that lend money. They will still check your credit score and finances but they may be more lenient.
In return for their leniency, they can charge much higher interest rates. They are private institutions with fewer regulations than banks and credit unions.
Watch out for loan sharks. They can charge exorbitant levels of interest.
Mortgages
Getting a mortgage to buy a home is a whole other category of loans. But credit scores are still very important in the process.
Buying a home is usually the most expensive decision a person makes in their life.
Factors to consider when applying for a mortgage include:
- 15 year or 30 year mortgage
- Fixed or variable interest
- Credit score
- Earnings
- Outstanding debts
- Economy
- Housing market
The housing market is strong after recovering from the brink of disaster after the crash.
At first they had to provide very low mortgage interest rates and incentives for home buyers. Now those low rates and incentives have dried up in a strong market.
Having good credit can get you a lower interest rate. Even a fraction of a percentage point in interest makes a big difference. It can add up to tens of thousands of dollars over the course of a 15-30 year mortgage.
Auto Loan
Buying a car or truck is expensive. New vehicles can cost $20,000 - $50,000+ and even used cars can be very pricey. Most people can't afford to buy a vehicle with cash, so they need a loan.
Many automotive dealerships advertise financing for even people with bad credit. That's not a guarantee though. You can get guaranteed financing or lower rates if you have better credit.
The better your credit is, the more expensive the vehicle you can buy. You can also get reduced interest rates if your credit score is solid.
Auto loan financing is often times tied to the economy along with supply and demand. The automotive market is strong now so low financing and 0% APR financing options are harder to find.
Personal Loan
You could always take the route of asking for a personal loan from a family member, friend or associate. Chances are they won't actually run your credit, but if you can prove that you do have good credit then it would help.
People who know you have a basic grasp of your financial responsibility. You never know though so showing them concrete data on your finances can make a difference.
If you prove that your credit score is strong, you could ask for your loan interest and payback date to have better terms.
Better finances could even save a friend or family relationship. Enormous fights occur because of loans so anything you can do to avoid them is smart.
Manage Your Money With Good Credit Loans
Getting the right loan and managing your finances is critical throughout your life. Learn from the experts to keep your credit score as high as possible. Learn more about good credit loans and improving your credit on the Lean Startup Life blog.
