When your credit is less than perfect, and you feel like we have nowhere to go to obtain a short term loan when the need for cash arises, you may find yourself shuffling in to take out a payday loan. You might think they are the only place you can possibly secure a loan. That’s a mistake.
Before you get on the endless roller coaster of loaning and re loaning at ungodly interest rates, stop by your credit union or bank. Personal loans are considerably more affordable, and you may qualify even if your credit is somewhat less than stellar.
What’s the difference?
Far from a payday advance, a personal loan is generally a small loan (as bank loans go), repaid in installments ranging from a few months to several years. They make up one of the largest segments of the loan industry, and you just might be surprised at who qualifies for a personal loan.
The standards used by banks, credit unions and other lending institutions vary widely, so shop around a bit. Even if your credit needs help, chances are good that you can find a personal loan somewhere, as long as you are employed. IT does help if you also have something valuable to serve as collateral, but this is generally not absolutely necessary.
Where to get personal loans
Interest rates on personal loans vary widely from bank to bank. You can shop around in person at banks and credit unions or online at websites such as bankrate.com. Credit unions and smaller lending institutions tend to be more willing to look at individual circumstances, so if your credit score is low, you might want to consider trying them first. Additionally, credit unions are more often willing to make small loans. Over 60% of credit unions make loans of less than $500, something few banks will do.
You may still pay a fairly high interest rate for a personal loan if your credit is poor, but it will be a considerably better interest rate than payday loans. Additionally, taking out a personal loan can help you begin to rebuild your credit, as long as you make your payments consistently. The advantages are clear. Before you head out to the cash advance vendors, stop into your financial institution first and see if you qualify for a personal loan.
Photo via Adam Pigott Photography