There are many different types of loans available, and some can especially help people fix their credit and get out of debt quickly. However, with so many lenders on the market, there are some loans that make for better and safer options for people with poor credit than others.
You do not ever want to end up taking out a loan that does not help you, nor helps your credit either. Before you take out a loan, here are a few things that you should look for to determine whether or not the loan you intend to take out is a safe one that will help your credit score improve.
Reviews
Established lenders will always have reviews from previous customers, even lenders that are specifically for people with poor credit. Now is not the time to try to give the new lending agency on the block their first chance; rather, you want an established lender with a reputation of working well with, and being fair to, customers with credit scores that are in the same range as yours. The key here is also to make sure that the lender has experience working with people that have low credit scores, because you may have found a lender with some of the best online reviews that you have ever read, but they may be notorious for rejecting or mistreating customers with lower FICO scores.
Besides just reading the reviews others leave, you should consider reaching out to those reviewers with your specific questions about a lender you are considering. Reviews are often only three to five sentences long, and can leave out a lot of details that are critical to your decision. By reaching out to individual reviewers, you may be able to get those questions answered, as well as gather critical information that you hadn’t even thought of up to that point.
Known Brands
While the Internet is one way to find out whether your lender has a good reputation and a high status in the personal financial field, another way that people sometimes overlook is the power of talking to another human being and discussing their experiences. Talking to other people that have gone through the same thing that you are going through, and seeing what they have done, is a good source of inspiration for the practices that you should be taking and the lenders that you should be calling.
Personal financial advisors will also be able to tell you lenders that have worked with their clients in the past, so if you can afford such an advisor, they can greatly help you figure out which loan is best for your current financial situation, and where you should take that loan out from. They will know better than anyone else about which lenders to trust and which to steer clear of.
Confident lenders will also be able to list off their credentials, or tell you a place online where you can see their credentials, if you call them over the phone. Examine them to make sure that the lender is not only able to tell you these credentials right way, but also to make sure that they are actually legitimate credentials as well.
Interest Rates
It is no secret that different lenders have different rates, and this especially varies depending on your credit score, as well as the type of loan that you are seeking to take out. When shopping for a lender, call them and ask about their interest rates for people in your current financial situation, and make a list or a spreadsheet comparing the interest rates for all of the lenders that you are considering.
Before some lenders determine the interest rate for your loan, they will ask to perform a hard credit check, or a hard inquiry, about your credit score. These are lenders that you should avoid at all costs as well. While for some types of loans, especially large or long term loans, this cannot be avoided, it should not be a factor in the interest rate for a small or short term loan. This is because hard inquiries made by a lending institution actually harm your credit score, but inquiries about your credit score that you make do not affect it at all. Those are called soft inquiries, and before you start this process, you should make a soft inquiry to affirm your credit score.
Even if you are not planning on taking out a loan from that particular lending institution, it is also a good idea to see if you can negotiate the rate to one that is lower than the one that they advertise. Perhaps you can get a loan with a reduced rate because of VA benefits or military discounts, or maybe you can just get a reduced interest rate by asking for it and politely negotiating with the person on the other end of the line.
It is also common knowledge that the smaller the loan you seek, the lower the interest rate will be and the shorter amount of time you will need to pay off your debt in full. So, when you shop for a loan, you may want to alter the loan to the smallest amount possible, that would still satisfy your financial needs, in order to capitalize on a smaller interest rate.
Loans can be safe for people with bad credit scores, especially if you know what to look for in a financial institution. Hopefully, this article gave you some guidance. Search for reputable lenders with good reputations as told by online reviews, and through the word of mouth of your friends and your personal financial advisor, if you have one. These are the surefire ways that you will not be duped into taking out a bad loan, and help ensure that you take out loans that will do nothing but help you and your credit, so that you can achieve your long term and short term financial goals.