This is where it’s important to set realistic expectations. Your credit score doesn’t just affect your interest rate, it also comes into play when determining how much money you can borrow. Again, we’ll stress that a good credit rating isn’t the be-all and end-all of getting a loan, but the worse your score is, the lower the amount you’ll be eligible to borrow.
You’ll generally find that the highest amount most third-party lenders will be willing to let you borrow for a personal loan is up to $100,000. The average loan amount in the US is around $15,000 personal loan Alabama.
Try not to borrow more than you need to either. Go into a personal loan application with a clear idea of what you need the money for.
Most personal loans will have repayment terms between one and seven years. The length of time you choose to repay a loan, your credit rating, and financial circumstances all play a part in determining the interest rate, which can vary enormously.
This isn’t such a bad thing, as borrowing small amounts and paying them off quickly can really boost your credit score
Generally, the shorter the repayment term, the higher the interest rate will be. Confusingly, though, this doesn’t always mean short term loans are more expensive. This is because the longer you take to pay off a loan, the more you’ll generally pay overall. Even if the long term interest rate is lower.
This is why you should always check what the total repayment figure will be over the life of the loan. And remember to watch out for any early repayment penalties in the loan contract too.
Personal loans can be with you for a significant chunk of your life, and many lenders understand your circumstances can change over time. Some lenders may offer additional benefits, such as unemployment protection clauses, to help protect against unforeseen circumstances. This means if you lose your job during the loan repayment period, you won’t have to pay back the loan and your credit rating will be protected.
You might want to take a lot of the work out of your decision by going to a loan marketplace, where you’ll be presented with offers from dozens of different lenders
Make sure you read the fine print on all the clauses of your loan contract before signing and get as many protections as you can.
Applying for a loan online couldn’t be easier these days, and can usually be completed in just a few steps:
- Plan a budget and come up with a monthly payment you feel is affordable; make sure not to accept offers over this amount
- Check your credit score on FICO to get an idea of what you can borrow
- Research the best online lenders and marketplaces
- Provide basic personal details to the lender or connection service, including your desired loan amount
- The provider or marketplace will show you a range of options with varying rates and terms
- Select the one you like and the lender will run a hard check on your credit score
- Once approved, sign your loan agreement and receive your funding
With a huge range of choice these days, it can be difficult to know where to start. Or, you can do your own independent research. Either way, we’d recommend looking into the following before you sign any agreement:
- Eligibility requirements – Check you’re eligible before you apply, making sure you meet the age, credit score, and income requirements. Otherwise, you’ll be hit with a hard check to your credit rating for nothing