In a tough economy, businesses do what they need to do in order to stay competitive. Because lenders are struggling right now, many are offering new personal loan terms that may be attractive to borrowers who have less than stellar credit. Understanding a little bit about those personal loan terms will help you be ready when you approach your lender.
One of the things you need to understand, right off the bat, is that your credit rating is important now more than ever. While lenders will offer personal loans to borrowers with bad credit, you’re going to be facing terms that aren’t nearly as attractive as what other borrowers will get. For example, you might see an interest rate higher than 15 percent if you have some bad credit history.
On the other hand, people with a decent credit history may be in luck. Over the past year, lenders have actually dropped rates on personal loans for many people. In fact, if you qualify, you may be able to get a personal loan at a very reasonable interest rate, maybe even one that’s not too much higher than the rate would be on a secured loan, such as a car loan or home loan.
Because of this, you need to make sure you do what you can to keep your credit rating on the high end. The most important thing you can do in this regard is just to pay your bills, on time, every month. This can be a challenge, especially in the middle of a recession. However, if you want to improve your credit, that’s the number one thing you can do.
Another thing you can do to take advantage of these new low rates on personal loans is to correct errors in your credit report. Get a copy of your credit report and check to see if anything erroneous is on it. You can even get a copy of your credit report free once a year. If anything is amiss, contact the credit reporting agency with documentation that shows the error and they are legally obligated to correct it.
When you prepare to visit your lender to apply for a personal loan, realize that you’ll be asked what you’re going to use the money for. You need to be able to explain what you will spend the money on, as well as explain why you need the loan.
Finally, recognize that these new personal loan terms are often open to negotiation. If you’re in a position to negotiate the interest rate, for example, your lender might be able to find a way to help you out. This is especially true if you’ve been pre-approved for the loan, and if you’re dealing with a bank where you have other business.