6 Genuine Ways to Get a Great Personal Loan
One thing you need to know about personal loans is that there are good ones and bad ones.
What distinguishes a good loan from a bad one is the interest rate and the level of difficulty in repaying the loan. Bad loans like payday loans and cash advances, while helpful for now, can be financially devastating in the long run. The interest rate for payday loans generally varies between 200%-500%, an exorbitant amount. While the interest rate for cash advances is 400%, so if you’re short on cash, don’t settle for just any loan.
Nevertheless, the right loan for you may simply be out of reach, but today we’ll give you the top 10 ways to get a great personal loan.
1. Make yourself a desirable borrower
Credit history, credit history, credit history. In terms of getting a personal loan, having good credit is probably the most valuable way to ensure you get the loan you need. So, before considering any loans, good or bad, make sure your credit history is in order. A FICO score 579 or less is generally considered bad credit and most lenders will be hesitant to offer you a loan. While, according to Experian, even a higher score of 580 to 669 will put you in a difficult situation with obtaining a loan.
However, there are ways to increase your score:
- Pay your bills on time
- Catch up on your overdue balances
- Dispute anything that doesn’t appear on your credit report
- Write a Goodwill letter
2. Improve your debt to income ratio
The DTI or debt-to-income ratio is a percentage that indicates the amount of a potential borrower’s income that is allocated to his or her debts. Lenders use this percentage to determine your ability to make monthly payments for the money you plan to borrow.
You can easily calculate this ratio by adding up your monthly debt. This can include bills, such as heating and electricity, as well as subscription services. Once you have calculated your debt, divide it by your gross salary or the amount you earn before taxes. For example, if you pay $900 for rent and $200 a month for heat, hydro, and internet, your monthly debt is $1,100. Now divide that by your gross monthly income, $2,500, and your DTI ratio is 44%.
Most qualified borrowers have DTI ratios below 43%it is therefore important to explore different avenues to reduce your monthly debt, such as reducing unnecessary recreational activities or finding more affordable alternatives to monthly subscription services.
3. Eliminate high-interest credit card debt
Speaking of ways to reduce your debt-to-income ratio, eliminating any debt associated with a 20% interest rate (APR), such as high-interest credit cards, should be your first thing to do when reducing your DTI ratio.
Best ways to get rid of this type of debt:
- Transfer your debt to a 0% APR introductory credit card.
- Apply your “play money” to your balance to reduce interest rates.
- Double your payments to pay off your debt faster and avoid having to pay interest.
4. Increase your income
What many lenders do not disclose to borrowers is their income requirements. Lenders have these requirements to ensure that certain people can afford to repay their debt. Income requirements vary with each lending institution; however, on average, a good income is considered to be $$15,000 to $20,000 for the lowest loan amount.
If you’re trying to increase your income quickly, consider applying for jobs that offer tips – on average, waiters do $190 in tips per day and flexible hours jobs, so you can easily devote time to both of your employers.
Once you’ve found another job and earned a significant amount of money, gather the necessary documents to prove your income, such as monthly bank statements, tax returns, and pay stubs.
However, it’s also important to note that if you’re not making at least $15,000 a year, getting a personal loan can do you more harm than good, as you have to pay off monthly APR balances.
5. Consider putting guarantees in place
It’s not anyone’s first choice to put up a personal item for a personal loan, but if you don’t meet the other requirements, pledging valuables may be the best way to get a loan. , in particular a secured personal loan (collateral-backed loans). Therefore, if you fail to make the payments, your lender may repossess such items as your investment account, collectibles, and other valuables.
6. Consider alternatives
If you find yourself unable to obtain a personal loan through the usual route, consider other types of personal loans. For one thing, a personal loan isn’t a one-size-fits-all type of loan, so you’re not the only one going this route. Other types of personal loans to consider include:
Peer-to-peer lending: P2P loans are personal loans; however, these types of loans are guaranteed by individuals rather than loan companies and they offer more leniency than these companies.
Payday advance: A payday advance is a loan that borrowers get from their employer. Borrowers of this type of loan essentially withdraw funds from their future paychecks, without having to request funds from traditional lenders.
Financial support from family or friends: If you value your independence, it can be uncomfortable to ask others for help. But you must remember that your friends and family are there to support you and you will regain your independence.