Determine Your Credit Worthiness
As you prepare for a payday loan, the best first step is finding out your credit score. This three-digit number is a numeric manifestation of your credit health, and it plays a huge role in the type – and quality – of loan you can qualify for.
Getting a free copy of your credit score will help you determine your next best steps. From there, you can start shopping for loans among varying banks and financial institutions.
If you have excellent credit (a FICO score of at least 720), your best option is almost always a 0% APR credit card. With these cards, you will pay 0% on purchases for anywhere from 12 – 21 months.
The biggest benefit is that you can avoid paying interest on your purchases during the card's 0% introductory offer period. Not only that, but you don't have to visit a bank or gather excessive paperwork, either. Most of the time, you can apply for a payday loan online.
If you have good credit (A FICO score between 690 and 719) and can't qualify for payday loan, you should be able to qualify for a payday loan from an online bank or traditional lender. The better your credit score and the higher your income, the more money you can borrow and the better loan rates you'll receive.
If you have average credit (FICO scores between 630 and 689), you will likely need to apply for a payday loan with an online bank or traditional lender. Depending on your income and payment history, you could still qualify for a quality loan with low rates and fair terms.
With bad credit (a FICO score between 300 and 629), it's unlikely you'll qualify for an unsecured loan without a co-signer. You may need to take out a secured loan with collateral, such as your car or any land you own. You can also consider finding a family member to guarantee the loan.
Where Can You Get Secured Loans?
There are three major types of lenders you can go to for secured loans:
- Bank lenders. If you already have a relationship with a bank, this might be a good place to start, but be advised that not all banks offer secured loans and your current bank may not necessarily offer the most competitive terms on secured loans.
- Credit unions. Some credit unions offer many of the same services as banks, including loans. This would require that you be a member of the credit union, but membership requirements have become much less restrictive over the years.
- Non-bank lenders. There are many firms that specialize in lending without offering traditional bank services, like deposit accounts. Many of these non-bank lenders have a strong on-line presence, which makes finding and comparing rates all the easier.
Use these choices to your advantage by shopping around for the best loan terms available. Because interest rates on secured loans can be fairly steep, shopping around can result in significant savings.
What Is A Credit Builder Loan?
A credit builder loan is a type of loan that almost anyone can take out, even if you have no credit, very little credit, or poor credit. In fact, the entire purpose of a credit builder loan is to help people increase their credit score so they can achieve some of their larger life goals.
So, if you're a recent college graduate with only your student loans on your credit report, a credit builder loan can allow you to diversify your credit streams and show future lenders that you can handle different types of loans. If you have a bad credit history that includes things like debt in collections or a home foreclosure, a credit builder loan can be the first step to rebuilding your credit.
Even if you already have a good credit score, a credit builder loan can add another loan to your credit report, which improves the "credit mix" portion of your score. There are a limited number of ways that you can improve this portion of your score and a credit builder loan is an easy and affordable option.