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Does Refinancing Hurt Your Credit?

Before you make any big financial decision, it’s crucial to learn how it may affect your credit score. If you’re looking to refinance, it’s natural to wonder if it might hurt your credit.

Typically, your credit health will not be strongly affected by refinancing, but the answer isn’t always black and white. Whether you’re still considering your options or already made your choice, we’ve outlined what you need to know about refinancing below.

What Is Refinancing?

Refinancing is defined by taking on a new loan to pay off the balance of your existing loan balance. How you approach a refinancing decision depends on whether it’s for a home, car, student loan, or personal loan. Since refinancing is essentially replacing an existing debt obligation with another debt obligation under different terms, it’s not a decision to take lightly.

If you’re worried about how refinancing will affect your credit health, remember that there are multiple factors that play into whether or not it hurts your credit score, but the top three factors are:

1) Having a Solid Credit Score

You won’t be in a strong position to negotiate refinancing terms without decent credit.

2) Earning Sufficient Income

If you can’t prove that you can keep up with loan payments after refinancing, it won’t be possible.

3) Proving Sufficient Equity

You’ll also need to provide assurance that the payments will still be made if your income can’t cover the cost. It’s recommended that you should have at least a 20 percent equity in a property when refinancing a home.

 

criteria-for-being-able-to-refinance-successfully

 

How Does Refinancing Hurt Your Credit?

Refinancing might seem like a good option, but exactly how does refinancing hurt your credit? In short, refinancing may temporarily lower your credit score. As a reminder, the main loan-related factors that affect credit scores are credit inquiries and changes to loan balances and terms.

Credit Inquiries

Whenever you refinance, lenders run a hard credit inquiry to verify your credit score. Hard credit inquiries typically lower your credit scores by a few points. Try to avoid incurring several new inquiries by using smart rate shopping tactics. It also helps to get all your applications in during a 14–45 day window.

Keep in mind that credit inquiries made during a 14–45 day period could count as one inquiry when your scores are calculated, depending on the type of loan and its scoring model. Regardless, your credit won’t be permanently damaged because the impact of a hard inquiry on your credit decreases over time anyway.

Changes to Loan Balances and Terms

How much your credit score is impacted by changes to loan balances and terms depends on whether your refinanced loan is reported to the credit bureaus. Lenders may report it as the same loan with changes or as an entirely new loan with a new open date.

If your loan from refinancing is reported as a new loan, your credit score could be more prominently affected. This is because a new or recent open date usually means that it is a new credit obligation, therefore influencing the score more than if the terms of the existing loan are simply changed.

How Do Common Types of Refinancing Affect Your Credit?

Refinancing could help you pay off your loans quicker, which could actually improve your credit. However, there are multiple factors to keep in mind when refinancing different types of loans.

 

main-types-of-refinancing-that-can-affect-your-credit

 

Refinancing a Mortgage

Refinancing a mortgage has the biggest potential impact on your credit health, and it can definitely affect your FICO score. How can you prevent refinancing from hurting your credit too much? Try concentrating your credit inquiries when you shop mortgage rates to a 14–45 day window — this will help prevent multiple hard inquiries. Also, you can work with your lenders to avoid having them all run your credit, which could risk lowering your credit score.

If you’re unsure about when to refinance your mortgage, do your research to capitalize on the best timing. For example, refinancing your mortgage while rates are low could be a viable option for you — but it depends on your situation. Keep in mind that losing your record of paying an old mortgage on time could be harmful to your credit score. A cash-out refinance could be detrimental, too.

Refinancing an Auto Loan

As you figure out if refinancing your auto loan is worth it, be sure to do your due diligence. When refinancing an auto loan, you’re taking out a second loan to pay off your existing car debt. In some cases, refinancing a car loan could be a wise move that could reduce your interest rate or monthly payments. For example, if you’re dealing with an upside-down auto loan, you might consider refinancing.

However, there are many factors to consider before making an auto loan refinancing decision. If the loan with a lower monthly payment has a longer term agreement, will you be comfortable with that? After all, the longer it takes to pay off your car, the more likely it is to depreciate in value.

Refinancing Student Loans

When it comes to student loan refinancing, a lower interest rate could lead to major savings. Whether you’ve built up your own strong credit history or benefit from a cosigner, refinancing can be rewarding.

Usually, you can refinance both your federal and private student loans. Generally speaking, refinancing your student loans shouldn’t be detrimental in the grand scheme of your financial future. However, be aware that refinancing from a federal loan to a private loan will have an impact on the repayment options available to you. Since federal loans can offer significantly better repayment options than private loans, keep that in mind before making your decision.

Pros Cons
If the cost of borrowing is low, securing a lower interest rate is possible Credit scores can drop due to credit checks from lenders
If your credit score greatly improved, you can refinance to get a better rate Credit history can be negatively affected by closing a previous loan to refinance
Refinancing a loan can help you lower expenses in both the short term and long term Refinancing can involve fees, so be sure to do a cost-benefit analysis

How to Prevent Refinancing from Hurting Your Credit

By planning ahead, you can put yourself in a position to not let refinancing negatively affect your credit and overall financial health.

Try to prepare by reading your credit reports closely, making sure there are no errors that could keep your credit application from being approved at the best possible rate. Stay one step ahead of any errors so you still have time to dispute them. As long as you take preventative measures in the refinancing process to save yourself time and money, you shouldn’t find yourself struggling with the refinancing.

If refinancing makes sense for your situation, you shouldn’t be concerned about it hurting your credit. It might not be the most ideal situation, but it’s extremely common and typically relatively easy for your credit score to bounce back.

If you notice that your new loan from refinancing causes alarming changes when you check your credit score, be sure to reach out to your creditor or consider filing a dispute. As long as you’re prioritizing your overall financial health through smart decision making and budgeting, refinancing shouldn’t adversely hurt your credit in the long run.

 

 

 

The post Does Refinancing Hurt Your Credit? appeared first on MintLife Blog.

Source: mint.intuit.com

How to Get Debt Consolidation Loans When You Have Bad Credit

Debt consolidation is one of the most effective ways to effectively manage debt. It can greatly improve your debt-to-income ratio and help you get back on your feet. You will have more money in your pocket and less debt to worry about, and while your options are a little more limited if you have bad credit, you can still get a consolidation loan.

In this guide, we’ll look at the ways that a debt consolidation loan will impact your credit score, while also showing you the best ways to consolidate credit card payments and find a credit card consolidation plan that suits your needs.

What is a Debt Consolidation Loan and How Does it Work?

A debt consolidation loan can help you to manage credit card debt and other unsecured debts by consolidating them into one, manageable monthly payment. You get a large loan and use this to clear all your current debts, swapping several high-interest debts for one low-interest loan.

You’ll consolidate multiple payments into a single monthly payment, and, in most cases, this will be much less than what you’re paying right now.

The problem is, creditors aren’t in the business of helping you during your time of need. They’re there to make money, and in exchange for your reduced monthly payment, you’ll get a loan that extends your debt by several years. So, while you may pay a few hundred dollars less per month, you could pay several thousand dollars more over the lifetime of the loan.

Why Consider Debt Consolidation for Bad Credit?

You can use a debt consolidation loan to consolidate credit card debt, clear your obligations, reduce the risk of penalties and fees, and ultimately improve your credit score. What’s more, you may still be accepted for a debt consolidation loan even if you have a poor credit score and a credit report with several derogatory marks.

It’s an option that was tailormade for borrowers with lots of unsecured debt, and it stands to reason that anyone with a lot of debt will have a reduced credit score. Of course, it still helps if you have a high credit score as that will increase your chances of getting a low-interest debt consolidation loan, but even with bad credit, you can get a loan that will reduce your monthly payment.

How Does Debt Consolidation Affect Your Credit Score?

A debt consolidation loan can impact your credit score in a number of ways, all of which will depend on what option you choose:

  • A balance transfer can reduce your score temporarily due to the maxed-out credit card and a new account.
  • If you use a consolidation loan to clear credit card balances, you will diversify your credit report, which can benefit up to 10% of your credit score.
  • If you continue to use your credit cards after clearing them, your credit utilization will drop, and your credit score will suffer.
  • A new consolidation loan account will reduce your credit score because it’s a new account and because the average age of your accounts has decreased.
  • Debt management will reduce your credit utilization score by requiring you to cancel credit cards. This accounts for 30% of your total credit score. 

The good news is that all of these are minor, and the short-term reductions should offset in the long-term. After all, you’re clearing multiple debts, and that can only be a good thing. 

A debt consolidation loan will not impact your score in the same way as debt settlement or bankruptcy.

Alternatives to a Debt Consolidation Loan 

A debt consolidation loan isn’t your only option for escaping debt. There are numerous options for bad credit and good credit, all of which work in a similar way to a debt consolidation loan.

These may be preferable to working with a consolidation loan company, especially if you have a lot of unpaid credit card balances or you’re suffering from financial hardship.

How Does a Debt Management Program Work?

Debt management is provided by credit unions and credit counseling agencies and offered to individuals suffering financial hardship and struggling to repay their debts. A debt management plan typically lasts three to five years and works with unsecured debt only, which includes medical debt, private student loans, and credit cards, but not mortgages or car loans.

A debt management plan ties you to a credit counseling agency, which acts as the middleman between you and your creditors. The agency will help to find a monthly payment you can afford and then negotiate with your creditors. You make your monthly payment through the debt management program and they distribute this to your creditors.

Debt management specialists are experts in negotiation and know how to get creditors to bend to their ways. They understand that lenders just want their money and are keen to avoid defaults and collections, so they remind them that failing to negotiate may increase the risk of such outcomes.

Debt management programs are not free. You will be charged a small up-front fee in addition to a monthly fee. However, the amount of time and money they save you is often worth the small charge.

The only real downsides to a debt management plan is that you’ll be required to cancel most of your credit cards, which will impact your credit score, and if you miss a single payment then creditors will revert to previous terms and your progression will be lost.

A Balance Transfer

You don’t need a debt consolidation loan to consolidate your debt. You can also use something known as a balance transfer credit card. 

A balance transfer allows you to consolidate credit card debt onto a single card. These cards offer you 0% interest for up to 18 months and allow you to transfer multiple credit card balances.

As an example, let’s assume that you have the following credit card balances:

  • Card 1 = $5,000
  • Card 2 = $2,000
  • Card 3 = $3,000
  • Card 4 = $5,000

That gives you a total credit card balance of $15,000. If we assume an APR of 20% and a minimum payment of $500, you will repay over $20,000 in 42 months, with close to $6,000 covering interest alone.

If you use a balance transfer credit card, you will be charged an initial balance transfer rate of between 3% and 5%, after which you will not be required to pay any interest for up to 18 months. Continue making those same monthly payments, and you’ll repay $9,000 before that introductory period ends, which means your debt will be reduced to just $6,000 and can be cleared in 14 months with less than $800 in total interest.

This is a fantastic option if you have a strong credit score, otherwise, you may struggle to find a credit limit high enough to cover your debts. However, it’s worth noting that:

  • Your credit score may take an initial hit due to the new account and maxed-out credit card.
  • The interest rate may be higher, so it’s important to clear as much of the balance as you can before the introductory period ends.
  • You may be charged high penalty fees for late payments.
  • You can’t move credit card debt from cards owned by the same provider.

What About Debt Settlement?

Debt settlement works in a similar way to debt management, in that other companies work on your behalf to negotiate with your creditors. However, this is pretty much where the similarities end.

A debt settlement specialist will request several things from you:

  • You pay a fee (charged upon settlement).
  • You move money to a secure third-party account.
  • You stop meeting your monthly payments.

They ask you to stop making payments for two reasons. Firstly, it will ensure you have more money to move to the third-party account, which is what they use to negotiate with creditors. They will offer those creditors a lump sum payment in exchange for discharging the debt, potentially saving as much as 90%, on top of which they will charge their fee. 

Secondly, the more payments you miss, the more unlikely it is that your account will be settled in full, at which point the lender will be more inclined to accept a sizable settlement.

Debt settlement is not without its issues. It can reduce your credit score, increase the risk of litigation and take several years to complete. However, it’s the cheapest way to clear your debts without resorting to bankruptcy.

You can do debt settlement yourself by contacting your creditors and negotiating reduced sums, but you will need to have a large sum of cash prepared to pay these settlements and you’ll also need a lot of patience and persistence. There are also companies like National Debt Relief that can help, as well a huge number of lesser-known but equally reputable options. 

Who is Eligible for a Personal Loan for Debt Consolidation?

In theory, you can use a personal loan as a debt consolidation loan. In other words, instead of working with a debt consolidation company and allowing them to set the rates and find suitable terms, you just apply for a personal loan, use it to pay off your debts, and then focus your attention on repaying that loan.

This can work very well if you’re using it to repay credit card debt. The average credit card APR in the US is 16% to 20%, while the average personal loan rate is closer to 6%. A personal loan acquired for this purpose will give you more control over the total interest and repayment term. 

However, while you may pay less over the term, it’s unlikely that you’ll reduce your monthly payments. A debt consolidation loan is designed to provide an extended-term so that the monthly payment will be reduced, and unless you choose a loan with a long term, you won’t get the same benefits.

The biggest issue, however, is that you need a very good credit score to get a loan that is big enough to cover your debts and has interest that is low enough to make it a viable option. This is easier said than done, and if you’re drowning in debt there’s a good chance your credit score will not be high enough to make this feasible. 

Is it Time for Bankruptcy?

If you have mounting credit card debt, personal loan debt, and private student loans, and you’re struggling to make the repayments or clear more than the minimum amount, you may want to consider bankruptcy.

It should always be seen as the last resort, as it can have a seriously negative impact on your credit score and make it difficult to get a home loan, car loan, or low-interest credit card for many years. However, if you’re not confident that debt settlement will work for you and believe you’re too far gone for debt management and consolidation, speak with a credit counselor and discuss whether bankruptcy is the right option.

You can learn more about this process in our guides to Filing for Bankruptcy and Rebuilding your Credit After Bankruptcy.

Debt Consolidation for Bad Credit Homeowners

If you own your home, you have a few more options for debt consolidation. When you use your home as collateral against a loan it’s known as a secured debt. It means the lender can repossess your home if you fail to meet the repayments. This also eliminates some of the risks associated with lending, which means they offer more favorable interest rates and terms.

Home Equity Loan and HELOC

An equity loan is a large personal loan secured against the value tied-up in your home. You can acquire an equity loan when you own a large share of your property, in which case you’re using that share as collateral.

Interest rates are very favorable, and you can receive a consolidation loan that clears all your debts and leaves only a small monthly payment and easily manageable debt in their place.

A home equity line of credit (HELOC), works in much the same way, only this time you’re given a line of credit similar to what you’d get with a credit card. You can use this credit to repay your debts, after which you just need to focus on repaying the HELOC.

An equity loan and a HELOC provide the lowest possible interest rates of any debt consolidation loan. However, failure to meet your monthly payments will damage your credit score and place your home at risk.

Cash-Out Refinancing for Consolidation

Cash-Out refinancing replaces your current mortgage with a new, larger mortgage. The difference between these two home loans is then released to you as a cash sum, allowing you to clear your debts in one fell swoop. 

Cash-Out refinancing is often used to fund a child’s college education or a new business, but it’s becoming increasingly common as a form of debt consolidation, helping American homeowners to clear credit card debt and other unsecured debts.

Reverse Mortgages

Reverse mortgages work in a similar way to home equity loans, but with a few key differences. Firstly, they are only offered to homeowners aged 62 or older. Secondly, there is no monthly payment and no other recurring obligations.

A reverse mortgage is only repaid when you sell the home or die. There are also some obligations with regards to maintaining the home and living in it full time, but you don’t need to pay any fees and can use the money gained from this mortgage to clear your debts.

Summary: Consider Your Options

A debt consolidation loan is a great option if you’re struggling with debt. You can try a debt management plan if you have bad credit, a balance transfer if you have great credit, and debt consolidation companies if you’re somewhere in the middle.

But as discussed already, these are not the only options. The debt relief industry is vast and caters for every type and size of debt. Do your research, take your time, and make sure you understand the pros and cons of each option before you decide.

How to Get Debt Consolidation Loans When You Have Bad Credit is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

Pulte Mortgage Review

A wholly-owned subsidiary of PulteGroup since 1972, the third-largest homebuilder in America, Pulte Mortgage gives customers a financing option that differs from those of banks and online lenders.

As an imprint of the larger conglomerate, Pulte Mortgage leverages construction experience and a personal touch to take borrowers through the home purchase process, helping them understand their options and decide on the best mortgage loan for them. This is done through a personal loan consultant assigned to individual accounts.

While Pulte Mortgage does not have a profile on the Better Business Bureau’s webpage, the PulteGroup has an A- rating, though it is not accredited.

Pulte AT A GLANCE

Year Founded 1972
Coverage Area Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington
HQ Address 3350 Peachtree Road, NE, Atlanta, GA 30326
Phone Number 1-(866) 236-8165

Pulte Company Information

  • Part of the PulteGroup, the third-largest homebuilder in the United States
  • Based in Atlanta, the financing branch has served 400,000 borrowers across the country since 1972
  • Offers consumers a streamlined and integrated process, bringing a great deal of construction and lending experience
  • Has a broad menu of conventional, jumbo and government-backed loans, as well as specialty products
  • Assigns personal loan consultants to help guide borrowers understand mortgage rates and other specifics
  • Hosts a mortgage learning center for borrowers that includes a calculator, a glossary, and other resources

Pulte Mortgage Rates

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Pulte Mortgage Loans

Customers who are building homes through one of the approved PulteGroup builders can access loan products including:

Fixed-rate mortgages

Usually offered in 15- and 30-year terms, these mortgages feature a fixed rate throughout the life of the loan, ensuring a steady monthly payment that is easily budgeted for. Fixed-rate mortgages are generally best for homeowners who expect to settle down in their residence or just want the dependable structure. Pulte Mortgage has fixed-rate offerings with both low- and no-money-down payment requirements.

Adjustable-rate mortgages

Typically called ARMs, these mortgages have an interest rate that fluctuates with market conditions. These loans are ideal for borrowers with short-term housing plans who may move soon after closing.

Since interest rates are generally lower for ARMs, these products may be a good fit for those looking to make a profit, yet although rates are initially low with ARM loans and they remain fixed for a specified number of years, the risk of rates increasing with market fluctuations after the initial period exists.

The terms of these loans usually include a fixed rate for an introductory period that is rebalanced yearly, bi-annually or monthly. While traditional ARMs stay fixed for six months and are thereafter recalculated at the same interval, hybrid ARMs offer longer fixed terms, like 5/1 or 7/1 options, that are fixed for five or seven years respectively and rebalanced each year.

Jumbo mortgages

Sometimes consumers need higher loan amounts than traditional, conforming mortgages can offer, which are limited to $453,000. Homeowners who build their own homes or purchase homes in high-cost areas may need more robust financing options, which is where a jumbo loan comes in. These mortgages often cover loans between $453,100 and $2 million.

FHA mortgages

These loans are backed by the Federal Housing Administration (FHA), which allows for less strict qualification requirements to incentivize homeownership. With FHA mortgages down payments can be as little as 3.5 percent, while low credit isn’t an automatic disqualification.

VA mortgages

Veterans Administration-backed mortgages are intended for veterans, active-duty personnel, and qualifying spouses of those who have served in the military or armed forces. Little to no down payment may be required for these types of loans. 

Balloon mortgages

While most borrowers are familiar with mortgages that are paid for incrementally, balloon mortgages are the opposite. These types of mortgages are paid in lump sums over a shorter period of time typically spanning five to seven years but may feature a lower interest rate than a fixed-rate option. At the end of the mortgage, borrowers must refinance or sell their homes, which is something to be aware of.

Bridge loan

While Pulte Mortgage does not offer home equity loans or lines of credit, it can extend bridge loans. This product is a type of the second loan that uses the borrower’s present home as collateral, earmarking the proceeds for closing on a new house before the present home is sold.

Pulte Mortgage does not offer cash-out refinancing options or USDA loans, which are government-backed loans that incentivize rural homeownership through low down payments.

Pulte Mortgage Customer Experience

The idea behind Pulte Mortgage is to streamline the mortgage process for consumers, so it’s more effective and efficient. In that spirit, the mortgage process for borrowers is straightforward with lots of assistance available on the way. Pulte highlights its five-step process:

  1. The mortgage application is started either through a secure online portal or through the mail. A Pulte Mortgage team is also assigned at this point.
  2. The personal loan consultant contacts the borrower to talk about important information, determining personal needs and locking in a rate.
  3. The loan is processed, and credit approval is communicated.
  4. The closing date is set with a builder representative, while the loan processor coordinates necessary actions.
  5. The keys to a new home are ready!

Prospective borrowers who just want to do some research can also benefit from Pulte Mortgage’s resource library, which includes:

  • A calculator that helps determine the buying power
  • A glossary for mortgage terms you’re likely to encounter through the process and should be familiar with
  • A mortgage FAQ for specifics on homebuying and financing

Pulte Company Grades

Although Pulte Mortgage does not have a profile with the BBB, PulteGroup, its parent company, has am A- rating with the organization. Though the company is not accredited by the BBB, Pulte Mortgage has been in business since 1972.

Pulte Mortgage Underwriting

Pulte Mortgage does not publicly disclose its down payment or qualification requirements on its website. Customers who are building with Pulte Homes, or one of the associated PulteGroup brands, can access this information once they complete the mortgage application.

History of Pulte Mortgage

Not only is PulteGroup the third-largest homebuilder in the United States, but it’s also been financing mortgages since 1972. Thanks to a little horizontal integration, PulteGroup can assist homeowners from construction to mortgage closing through Pulte Mortgage, the wholly-owned subsidiary that offers loan products.

The selling point is Pulte Mortgage being a one-stop-shop for homeowners, informed by extensive residential construction and mortgage financing experience.

Pulte Mortgage finances new home construction for customers of Pulte Homes, Centex, Del Webb, DiVosta, and John Wieland Homes, which all fall under the PulteGroup umbrella. Personalization is a key focus, with personal loan consultants for each borrower.

It also has an extensive online learning center to help prospective homeowners become familiar with different loans it offers, including conventional, jumbo, FHA, and VA loans, as well as specialty products like balloon mortgages and bridge loans.

Bottom Line

PulteGroup can assist homeowners from construction to mortgage closing through Pulte Mortgage. Many customers enjoy the fact that Pulte Mortgage is a one-stop-shop for homeowners, informed by extensive residential construction and mortgage financing experience.

For more information visit their website.

The post Pulte Mortgage Review appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

What Are the Best Loans If You Have Bad Credit?

If you need to borrow money but your credit is less than stellar, it’s possible you’ll wind up with a bad credit loan. These loans are geared toward individuals with imperfect credit histories who can prove their income and ability to repay the loan. As a result of their bad credit, however, consumers who use bad credit loans typically pay much higher interest rates and loan fees. Bad credit loan customers may also be limited in how much they can borrow as well as the terms of their loan’s repayment.

From our perspective, LendingClub is the overall best option when it comes to getting a loan when you have bad credit.

Borrow Money with LendingClub

What To Do If You Think You Have Bad Credit

Step 1 — Get Your Actual FICO Score

The only way to find out if you have bad credit is to take a look at your FICO score, which isn’t difficult since many companies offer online access for free. While your FICO credit score isn’t the only credit score you have, it’s the one used by most lenders that offer personal loans.

According to myFICO.com, the credit score ranges are as follows:

  • Exceptional: 800 and up
  • Very Good: 740 to 799
  • Good: 670 to 739
  • Fair: 580 to 669
  • Poor: 579 or below

If your credit score falls below 579, there’s a good chance you could only get approved for a bad credit loan. If your credit is just “fair,” on the other hand, there’s still a chance you’ll wind up with a loan for bad credit.

Get My FICO Scores

Step 2 — Compare Multiple Offers

Once you have determined your credit score, you’ll want to start comparing offers from different lenders to see what fits your needs. You can use this tool to start that process.

Continue reading to find out how Good Financial Cents breaks down the best loans for bad credit and what you should watch out for.

Best Bad Credit Loans of 2021

If you feel you’re a candidate for a bad credit loan, it still makes sense to compare loan options to find the best deal. Loans for bad credit may come with higher interest rates and more fees, but some are still better than others.

For the purpose of this guide, we compared all the bad credit lenders to see how their loan products stack up. The following loans are the best of the best when it comes to loans for poor credit:

  • LendingClub
  • Avant
  • LendingPoint
  • OneMain Financial
  • Upstart

Bad Credit Loan Reviews

Before you apply for a loan with one of the bad credit lenders above, it helps to have a basic understanding of their loan offerings, interest rates, and any other important details they offer. The following individual loan reviews can help you determine which lender offers loans that might work for your situation.

#1: LendingClub

lendingclub bad credit loans

LendingClub is a peer-to-peer lender that operates outside of traditional banks. This means loans funded through the platform are initiated by private investors instead of banks, and it also means you may be able to get funding through LendingClub if you can’t get approved for a loan elsewhere.

Investors in search of higher returns on their money can agree to offer loans to consumers with bad credit who present a higher risk. As a result, LendingClub personal loans come with APRs that range from 6.95% to 35.89%. Obviously, loans with rates on the higher end of the scale will go to those with low credit scores.

Before you apply, it’s important to be aware that LendingClub charges an origination fee that can equal up to 6% of your loan amount. You can repay your loan anywhere from 36 to 60 months, and there’s no prepayment penalty if you pay your loan off early.

  • Pros: No minimum credit score requirement: check your rate online without a hard inquiry on your credit report
  • Cons: Potential for a high origination fee and interest rate

Get a Loan from LendingClub Today

#2: Avant

avant bad credit loan

Avant is another lender that often extends personal loans to consumers with low credit scores. With Avant, your interest rate will fall somewhere between 9.95% and 35.99% and you can repay your loan from 24 to 60 months. A loan funding fee of up to 4.75% of your loan amount is required as well, which will push up the cost of borrowing.

Avant claims that they have loaned $4 billion dollars to more than 600,000 consumers so far and that they have a 95% customer satisfaction rate. You can apply for a personal loan through Avant online, and you can even check your rate without a hard inquiry on your credit report.

  • Pros: No minimum credit score requirement; you can check your rate online without a hard inquiry on your credit report
  • Cons: High APRs and loan fees for bad credit

Borrow Better and Faster with Avant

#3: LendingPoint

lendingpoint bad credit loan

LendingPoint is another bad credit lender that offers personal loans to consumers who are willing to pay whatever APR it takes. Loans from LendingPoint come with APRs between 15.49% and 35.99%, and your loan origination fee can be as high as 6% of your loan amount.

You can repay your loan for anywhere from 24 to 48 months, and loans are offered in amounts up to $25,000. LendingPoint also lets you check your rate online without a hard inquiry on your credit report. You do need a minimum credit score of 585 to qualify for one of their loans.

  • Pros: Check your rate without a hard inquiry; low minimum credit score requirement
  • Cons: Pricey APRs and loan origination fee; loans not available in every state

Sign Up Today with LendingPoint

#4: OneMain Financial

one main financial bad credit loans

OneMain Financial offers personal loans in amounts between $1,500 and $20,000, and you can repay your loan for anywhere from 24 to 60 months. Interest rates range from 18.00% to 35.99%, and an origination fee may apply as well.

You can apply for a bad credit loan with OneMain Financial online, and you can get your loan approved and funded within a matter of days. You can even check your rate and gauge your ability to qualify without a hard inquiry on your credit report.

Finally, note that OneMain Financial has 1,600 physical locations in 44 states. To have your loan funded, you’ll need to visit a OneMain Financial location and meet with a loan specialist.

  • Pros: No minimum credit score requirement; borrow up to $20,000
  • Cons: Potential for pricey APR and loan origination fee; you are required to visit a physical branch to have your loan funded

Get Started with OneMain Financial

#5: Upstart

upstart bad credit loan

Upstart is a unique online lender that makes it easier for borrowers with poor credit to qualify for a loan. This company considers more than your credit score when approving you for a personal loan, meaning they may give more weight to additional factors like your income and how much education you have.

Borrowers who qualify can access between $1,000 and $50,000 in loan funds with a repayment period of 3 or 5 years. Interest rates range from 5.69% to 35.99%, however, depending on creditworthiness and other factors.

Fortunately, loans from Upstart don’t come with any prepayment penalties. You can also check your rate online without a hard inquiry on your credit report.

  • Pros: No minimum credit score requirement; borrow up to $50,000
  • Cons: Potential for pricey APR and loan origination fee

Get the Loan You Deserve with Upstart

How We Chose the Best Loans for Bad Credit

The lenders above offer loans that can be exorbitantly expensive when you factor in interest rates and fees. Since expensive loans are the norm for consumers with bad credit, however, these still represent the best loan options for people with risky credit profiles.

With that in mind, here are the factors we considered to come up with the loans for this list:

Easy Rate Check

Having the ability to check your loan rate online without a hard inquiry on your credit report is beneficial for potential borrowers who aren’t quite ready to fill out a full loan application. We ranked lenders who offer this option higher as a result. With an easy rate check, you can get an idea of your interest rate and loan fees before you apply.

Check Your Credit Score for FREE

No Prepayment Fees

While loans for bad credit typically come with high interest rates and more loan fees, we think prepayment penalties cross the line. We looked for bad credit loans that don’t charge prepayment penalties since borrowers should have the option to pay their loans off early.

Ability to Apply Online

Lenders that let you apply for a personal loan online are considerably more convenient, so we gave a better loan score to loan companies that offer this option. Bonus points were applied if you can complete the full loan application online and have your loan funded electronically.

Loan Reviews

We also looked at individual loan reviews on company loan pages and websites like Trustpilot. While all lenders have their share of poor loan reviews, the lenders that made our list boast considerably more positive user reviews than bad ones. Most of the lenders that made the cut for our ranking have customer approval rates over 90%.

Loans for Bad Credit: What to Watch Out For

Bad credit loans are not ideal since they come with high rates and fees that push up the total cost of borrowing. However, some bad credit loans are also considerably “better” than others based on how they charge fees and the rates they offer. Here’s everything you should watch out for before you apply.

Consider the Impact of High Rates

First, it can be immensely helpful to check your rate with multiple lenders in this space before you apply. There’s a huge difference between paying 25.00% APR and 35.99% APR even though both rates aren’t great, so you’ll want to pay the lowest interest rate that you can.
How much difference can it make? Imagine for a moment you need to borrow $10,000 and repay it over 60 months. Here’s what your monthly payment would look like — and how much interest you would pay overall — if you repaid your loan over 60 months with three different rates:

Loan APR Monthly Payment Total Interest Paid
10.99% $217.37 $3,042.46
25.99% $299.35 $7,960.73
34.99% $354.84 $11,290.34

Avoid Origination Fees If You Can

Also try to avoid loan origination fees if you can, although this may be difficult if your credit score is on the low end of the scale. Loan origination fees are charged as a percentage of your loan upfront, so you can’t avoid them — even if you pay your loan off early. They also add unnecessary expense to your bad credit loan without any benefit for you, the borrower.

Check for Prepayment Penalties

Also, make sure to check for any prepayment penalties that may apply to your loan, and if you can, opt for a lender that doesn’t charge these fees. It would be nice to have the option to pay your loan off early without a penalty if you wind up having the money you need to do so. If you’re able to pay your loan off ahead of schedule, you could pay a lot less in interest over your loan’s term.

Bad Credit Loans: Should You Improve Your Credit First?

If you’re worried about the impact of a bad credit loan on your finances, it can make sense to spend some time improving your score before you apply. If you’re able to pay all your bills early or on time for several months, for example, you could have a positive impact on your score. That’s because your payment history is the most important factor that makes up your FICO score. According to myFICO.com, this factor alone makes up 35% of your score.

The same is true if you’re able to pay down debt to decrease your credit utilization. This advice is based on the fact that how much you owe in relation to your credit limits is the second most important factor making up your FICO score at 30%.

In the meantime, try to avoid opening and closing too many accounts since either of these moves can also ding your score.

If you were able to move the needle and boost your credit score in the “fair” or “good” range, there’s a very good chance you could qualify for a less expensive personal loan with better rates and terms. Of course, this isn’t always possible if you need to borrow money sooner rather than later.

The Bottom Line

Bad credit loans may come with pricey APRs, but they are often the only option of last resort for borrowers whose credit has taken a hit. If you’re in the market for a loan and know you’ll need to get a loan for bad credit, the best thing you can do is compare loan options to find the best deal.

Keep an eye out for bad credit loans with the lowest interest rate and origination fee you can qualify for.

Also, look for lenders that let you check your rate and get prequalified online and before you fill out a full loan application.

With enough research, you should end up with a bad credit loan that helps your finances instead of making them worse.

The post What Are the Best Loans If You Have Bad Credit? appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

What Is A Consumer Loan?

A consumer loan is a loan or line of credit that you receive from a lender.

Consumer loans can be auto loans, home mortgages, student loans, credit cards, equity loans, refinance loans, and personal loans.

This article will address each type of consumer loans.

Get Approved for personal loan today.

Types of consumer loans:

Consumer loans are divided into several kinds of categories. They include auto loans, student loans, home loans, personal loans and credit cards. Regardless of type, consumer loans have one thing in common: you have to repay the loan at some period of time. 

Auto loans

Most people who are thinking of buying a car will apply for an auto loan. That is because buying a car is expensive.

In fact, it is the second largest expense you will ever make besides buying a house. And unless you intend to buy it with all cash, you will need a car loan.

So, car loans allow consumers to purchase a vehicle where they may not have the money upfront. With an auto loan, your payment is broken into smaller repayments that you will make over time every month.

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You can choose between a fixed or variable interest rate loan. But the most important thing is, whether you’re buying a new or used car, it’s important to compare loans to help you find the right auto loan for your needs.

Start comparing auto loans now!

Home loans

Another, and most common, type of consumer loans are home loans. A home loan or mortgage is a loan a consumer receives for the purpose of buying a house.

Buying a house is, undoubtedly, the biggest expense you’ll ever make in your life. So, for the majority of consumers who want to purchase a house, they will need to borrow the money from a lender.

Home loans are paid back over a period of time. Those mortgages term are typically 15 to 30 years. They can be variable rate or fixed rate. A fixed rate means that your repayments are locked in for a fixed term.

Whereas a variable rate means that your repayments depend on the interest rate going up or down when the Federal Reserve changes the rate.

Over the loan’s term, you will pay back the principle amount of the loan plus interest. This makes it very important to compare home loans. Doing so allows you to save thousands of dollars on interest and fees.

Personal Loans

The most common types of consumer loans are personal loans. That is because a personal loan can be used for a lot of things.

A personal loan allows a consumer to borrow a sum of money. The borrower agrees to repay the loan (plus interest) in installments over a period of time.

A personal loan is usually for a lower amount than a home loan or even an auto loan. People usually ask for $500 to $20,000 or more.

A personal loan can be secured (the consumer backs it with his or her personal assets) or unsecured (the consumer does not have to use his or her personal asset).

But most of them are unsecured, so getting approved for one will depend on your credit score, income and other factors.

But consumers use personal loans for different purposes. People take out personal loans to consolidate debts, such as credit card debts. You can use personal loans for a wedding, a holiday, to renovate your home, to buy a flt screen TV, etc…

Student Loans

Consumers use these types of loans to finance their education. There are two types of student loans: federal and private. The federal government funds a federal student loan.

Whereas, a private entity funds a private student loan. Generally, federal student loans are better because they come at a lower interest rate.

Credit Cards

Believe it or not credit cards is a type of consumer loans and they are very common. Consumers use this type of loan to finance every day expenses with the promise of paying back the money with interest.

Unlike other loans, however, every time your pay with your credit card, you take a personal loan.

Credit cards usually carry a higher interest rate than the other loans. But you can avoid these interests if you pay your balance in full immediately.

Small Business Loans

Another type of consumer loans are small business loans. These loans are used specifically to create a business or to expand an already established business.

Banks and the Small Business Administration (SBA) usually provide these loans. Small Business Loans are different than personal loans, because you usually have to provide a collateral to get the loan.

The collateral serves as a way to protect the lender in case you default on the loan. In addition, you will also need to provide a business plan for the lenders to review.

Home Equity Loans

If you have your own home, you can borrow money against it. These types of consumer loans are called home equity loans. If you’ve paid off the mortgage on the home, you can borrow up to the full value of the home.

Vice versa, if you’ve paid half of the mortgage on the home, you can borrow half of the value of the house. You can use a home equity loan for several purposes like you would with a personal loan.

But most consumers use this type of loan to renovate their house.  One disadvantage of this type of loan, however, is that you can lose your house in case of a default, because your house is used as a collateral for the loan.

Refinance loan

Loan refinancing is a basically taking a new loan to replace an existing one. But you get this loan specifically either to refinance your existing mortgage or to refinance your student loans or a personal loan.

Consumers usually refinance in order to receive a lower interest rate or to reduce the amount of monthly payments they are making on their existing loans.

However, reducing to a lower payment will lengthen the time to pay off the loan and you will accrue interest as a result.

Consumers also use this type of loan to pay their existing loans off faster. However, some mortgage refinancing loans come with prepayment penalties. So do you research in order to avoid that extra charge.

The bottom line is consumer loans can help you with your goals. However, understanding different loan types is important so that you can choose the best one that fits your particular situation.

So do you need a consumer loan?

Get Approved for personal loan today.

Speak with the Right Financial Advisor

If you have questions about your finances, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

The post What Is A Consumer Loan? appeared first on GrowthRapidly.

Source: growthrapidly.com