When You Get a Loan, it Pays to Comparison Shop
Smart people do their research and compare prices before making any kind of purchase, or to get a loan. This includes entering into a loan agreement with a lender. When it comes to loans, term considerations are many. For instance, confirm what interest rate a lender will be charging you and whether there are fees for taking out the money. Establish when your payment is due every month and when you’ll have the loan paid in full if you make the minimum payment on time each month. If you need to get a loan, it pays to comparison shop because different lenders charge different amounts.
You’ll Come Out Ahead if You Comparison Shop when you get a Loan
A recent and ongoing study launched to track the market’s range of annual percentage rates, or APRs on personal loans was begun to better understand the industry. In addition to determining rates across the board, the study uncovered numerous benefits to comparison shopping for loans.
According to the research, borrowers who had a credit rating that the industry considers good, which is between 690 and 719, and were looking to get a loan online for $10,000 with repayment terms of 36 months received offers from a minimum of two lenders. These individuals were offered interest rates that differed by 4.74 percentage points. With this percentage point difference, the dollar savings is about $800 over the life of a typical loan.
Will Shopping for a Loan Hurt Your Credit Score?
Your credit score is a precious commodity, one that can be your ticket to low interest rates, affordable down payments or favorable repayment terms. Because of this, you need to be careful when comparison shopping for rates. The reason for this is that some lenders check your credit score before deciding the terms of your loan. If they complete a hard credit check, then this can ding your score according to Credit Karma. Despite this, the damage to your credit score is likely to depend on the type of loan you need. For instance, auto or mortgage loan requests typically have some leeway when it comes to loan shopping.
Credit bureaus will usually come to the conclusion that you are comparison shopping by assessing the loan amount that you’re requesting and the loan type. When it’s time to get a loan, try to be consistent with your loan requests because consistency helps these agencies make this determination. The time period during which you can comparison shop without seeing a dip in your credit report varies. It is usually from about 14 days to as many as 45 days.
A Different Approach to Shopping Around
Before shopping around by making loan requests, complete basic research. For instance, visit the lender’s website. Also, look up the review sections of third party lenders to assess the terms that they often offer to people who have similar credit profiles to yours. This will help you narrow down your list of possible lenders before you begin making official requests that may necessitate a credit check.
You could also decrease the chances of a credit drop by keeping your loan requests to one type. If you need a personal loan, then avoid seeking an auto loan at the same time. When you try to obtain too much credit in a short time, you may come off to lenders as being desperate for money or irresponsible.
How to Get a Loan Online
With today’s technology, it’s easy to get an online loan. Make sure that the lender you’re considering is a legitimate one. Also, plan to share how much you make, your age and email address with the lender. Online loans are often for small dollar amounts ranging from just $100 to $200 to amounts that are as high as $1,000 to $1,500 or even slightly more.
They may also come with short repayment terms, meaning that you’ll need to pay the money back more quickly than you would with other loans. When you get a loan with bad credit, the lender may require you to repay it in as short as a week or two. However, if you take the time to comparison shop, you may be able to get a loan with repayment terms that are as long as six months to several years.
When you get a loan with bad credit, take steps to improve your credit score. The easiest way to do this is to make your payments on time and lower your debt-to-income ratio. Responsible credit use has a positive impact on the many different factors that credit bureaus consider when they’re determining your rating.
The Pros and Cons of Borrowing Money
According to Experian, when you get a loan online, there are a number of pros and cons that come with the financial product. Whether taking out a loan is a good idea for you mainly depends on how well you manage your borrowing over time. While a con to borrowing money is that you’re indebting yourself to a lender, the plus side is that it can help you make large ticket purchases, allowing you to break up a big expense into smaller, more affordable payments.
There are benefits to taking out a loan instead of using a credit card. For one, the loan will be available to use in cash if you need it. While credit cards are widely accepted, they are not always accepted everywhere. Home improvement projects may require cash. Some vendors may also work exclusively with cash payments.
The payment terms are another pro to this type of loan. Often, when people borrow money from a credit card, the minimum payment is set super low, so low that it’s easy for the borrower to just keep making the minimum payment for the next 30 years. With a personal or installment loan, the repayment terms are usually from 36 to 60 months, so you’ll have the loan payed back within a few years. You can usually repay these loans early without incurring a penalty. Also, lenders that offer personal or installment loans typically approve individuals with less than perfect credit scores.
Taking Control of Your Financial Future
If you need to get a loan with bad credit, you’ll likely save money in the long run by comparing the different loan products that are available to you. This step ensures that you’ll receive loan rates and payoff terms that you can manage. As you research your loan options, you’ll become more familiar with them, increasing your knowledge of the industry and how it can work for and against you.