An unsecured loan is money lent to you on just your signature. When you sign the loan
agreement, you promise to pay. In order to get a personal loan you have to understand
how the financial institutions think.
Most lenders use virtually the same guidelines with minor adjustments. Financial
institutions are in business to make money. They make money by lending you money.
You are important to their business success. Lenders are most interested in two things:
Can you pay them back and will you pay them back.? Your income must be enough to
support the payments that would be due. Lenders use a debt ratio to determine if you can
afford to make the required payments. Your ability to pay is measured by several factors.
(Your income, minus your outstanding debts).
To calculate your debt ratio, total your monthly debt, (car payments, rent or mortgage,
personal loans, alimony, etc.). Include the expected loan payment you are applying for.
Take that figure and divide it by the monthly income. Most banks will not lend if the ratio
is over 50%. Whether or not you get the loan depends on the ratio you get from your
lender. Your willingness to repay is based upon your past credit history. If you
demonstrated a good payment record in the past, a lender will figure you will continue
your good record in the future.
With signature loans, (no collateral) lenders can only threaten to harm your credit record.
So if your repayment record is already bad, the lender usually won't take the risk.
Where to Apply If your credit is good and your debt ratio is low you can get credit in
almost any place. Chances are your mailbox is filled with offers to get new credit cards,
switch to lower rate credit cards, upgrade to "gold" cards and a host of gimmicks
designed to get your business.
If your credit rating is less than favorable it is more of a challenge to get credit cards. If
you never had credit, the best course of action to establish credit is to first get a
department store, gas station credit card or a finance company credit card. You will pay
more interest. Try to get at least two of these types of cards. Establish a good record and
major credit cards will follow.
If you do not have good credit it is still possible to get signature loans. Finance
companies are usually willing to take more lending risks. They make high-risk loans that
banks and credit unions won't. The lending rules of finance companies are less strict
however, you'll pay higher interest rates. Usually, much higher! When you are trying to
re-establish credit they are usually the only ones who will take a chance with a high-risk
account so, you must accept the higher interest rates.
The following is a list of some of the major finance companies. Please check with each
company to determine their specific lending policy. Check your local telephone directory
for the offices nearest you.
agreement, you promise to pay. In order to get a personal loan you have to understand
how the financial institutions think.
Most lenders use virtually the same guidelines with minor adjustments. Financial
institutions are in business to make money. They make money by lending you money.
You are important to their business success. Lenders are most interested in two things:
Can you pay them back and will you pay them back.? Your income must be enough to
support the payments that would be due. Lenders use a debt ratio to determine if you can
afford to make the required payments. Your ability to pay is measured by several factors.
(Your income, minus your outstanding debts).
To calculate your debt ratio, total your monthly debt, (car payments, rent or mortgage,
personal loans, alimony, etc.). Include the expected loan payment you are applying for.
Take that figure and divide it by the monthly income. Most banks will not lend if the ratio
is over 50%. Whether or not you get the loan depends on the ratio you get from your
lender. Your willingness to repay is based upon your past credit history. If you
demonstrated a good payment record in the past, a lender will figure you will continue
your good record in the future.
With signature loans, (no collateral) lenders can only threaten to harm your credit record.
So if your repayment record is already bad, the lender usually won't take the risk.
Where to Apply If your credit is good and your debt ratio is low you can get credit in
almost any place. Chances are your mailbox is filled with offers to get new credit cards,
switch to lower rate credit cards, upgrade to "gold" cards and a host of gimmicks
designed to get your business.
If your credit rating is less than favorable it is more of a challenge to get credit cards. If
you never had credit, the best course of action to establish credit is to first get a
department store, gas station credit card or a finance company credit card. You will pay
more interest. Try to get at least two of these types of cards. Establish a good record and
major credit cards will follow.
If you do not have good credit it is still possible to get signature loans. Finance
companies are usually willing to take more lending risks. They make high-risk loans that
banks and credit unions won't. The lending rules of finance companies are less strict
however, you'll pay higher interest rates. Usually, much higher! When you are trying to
re-establish credit they are usually the only ones who will take a chance with a high-risk
account so, you must accept the higher interest rates.
The following is a list of some of the major finance companies. Please check with each
company to determine their specific lending policy. Check your local telephone directory
for the offices nearest you.
