Personal loans can actually improve your credit score

The conventional wisdom says that to improve your credit score, you have to chip away at all your debt, one account at a time, until everything is paid off. In many cases, that’s sound and solid advice. However, there are some scenarios in which taking out loans—personal loans—improves credit scores, saves thousands of dollars and allows consumers to reach their goals much faster.

Several factors influence credit scores:

• Debt to income ratio

• Credit utilization

• Credit diversity

• Prompt debt payments

Personal loans improve credit scores because they often have lower interest rates than store credit cards and many bank issued credit card accounts, so it makes sense to consolidate credit card debt with personal loans. The lower the interest rates, the faster the principle is paid off, and the faster the borrower is debt free. Though income levels may be static, more quickly paying off debts with personal loans improves credit scores by improving the debt to income ratio.

Credit utilization is the amount of available credit in use. Taking out personal loans improves credit scores when they are used to pay off other debts, thereby increasing the amount of available credit as the loan is paid off IF the credit card accounts are left open but not used.

Personal loans are an asset for younger borrowers trying to improve credit scores. Many young adults have either no credit or they have only high-interest credit cards. Adding personal loans to their credit reports improves their credit scores by introducing another—or a first—type of credit.

Finally, making debt payments is essential. Lower interest rates and fixed interest rates results in lower monthly payments. Personal loans improve credit scores because the lower monthly payments allow for more flexibility in household budgets, reducing the likelihood of making late payments because of unexpected expenses or a lower income.

Despite a tradition of accuracy and wisdom, conventional wisdom isn’t always wise and should be evaluated carefully according to each unique financial scenario. That’s when it makes sense to consult with an expert. America One Unsecured is one of the largest loan-consulting firms in the country. They have helped their clients secure hundreds of millions of dollars in personal and small business loans since 1999.

Personal loans: Time for a little spring cleaning

Long, gray winters with record-setting cold and snowfalls make springtime more than ever a season of renewal. Like kids, we’re looking forward to summer vacation. We’re ready to start fresh with the time-honored tradition of spring cleaning. But, if the gray clouds of winter still seem to be hanging over your financial landscape, personal loans for debt consolidation can provide a sort of spring cleaning, and get you headed out on that much deserved summer vacation.

The many advantages of personal loans over credit card debts mean you get relief a lot faster.
Lower interest rates mean lower monthly payments and more of your payment goes toward the principal.
Lower monthly payments mean you have more money to put toward other debts.
Fixed interest rates mean no sudden rate hikes that make it impossible to pay off your debts.
Paying off your credit cards lowers your credit utilization rate and increases your credit score; your higher credit score means you’ll qualify for more favorable rates and terms.

Personal loans have many other advantages besides all the money you’ll save by consolidating your debt. For instance, unsecured personal loans don’t require collateral, so you don’t have to own a house, have a clear title on your car, or have investments to put up as security. Moreover, personal loans offer a flexibility not found in any other type of loan; you decide how you want to use the money. Unlike an auto loan or a mortgage, borrowers can use their personal loans any way they.

So, if you’re still hunkering down with your head beneath the covers, consider using personal loans for a little financial spring cleaning. Before you know it, you’ll be planning a vacation instead of just dreaming of one.

America One Unsecured is one of the largest loan-consulting firms in the country. They have helped their clients secure hundreds of millions of dollars in personal and small business loans since 1999. Click here to learn more about America One Unsecured and find out how they can help you find the money you need and get the best terms and interest rates.

How to find the right lender for you needs

It’s easy enough to say a lender is someone who lends, but it’s not always that simple. Not every lender provides the same loans. One lender might make only business loans, while another lender makes only consumer loans. It’s not much of a challenge to find a lender who makes loans only to people who have stellar credit, but finding a lender who makes loans to someone who’s “credit score challenged” can be a different matter altogether.

So, how to you find the lender who’s right for you? There are three ways to narrow the field.

• You could call around to local financial institutions, asking what type of lender they are, and what their terms and rates might be for someone with your needs and credit history.
• You could ask friends or other business owners for recommendations. Ask where they’ve gotten loans in the past, and if the lender was someone they would use again.

• You could go through a loan-consulting firm that will analyze your needs and credit history and either present your application to a lender that specializes in loans like yours, or will advise you on what type of lender to use and how to maximize your chances of getting a loan with satisfactory rates and terms.

It hasn’t always been so, but today almost anybody can find a lender will to make a loan. Even someone with a low credit score can find a lender, if the borrower is willing and able to pay more for the loan.

There is no shortage of short-term lenders, cash advance storefronts, payday loan providers and pawnshops. It’s not hard to find a lender online with minimal requirements for income and credit, and most are able wire the loan to the borrower with a bank account within 24 hours—many can do so within an hour.

The one caveat that should be heeded when accepting loans of this type is to make payments on time; failing to do so can result in high penalties and higher interest rates. Though much has been written and said about how payday lenders take advantage of borrowers with limited options, the truth is that a short-term lender is often the only lender and the only option available. In addition, for a borrower who repays the loan on time, the option can be a lifesaver.

Personal Loan Rates a Better Bargain for Debt Consolidation

It’s more than a little ironic that most people borrow money to cover expenses they can’t afford, yet some loans and credit cards come with interest rates so high that they’re unaffordable. That used to be the case with personal loan rates, but right now they’re a lot less expensive than many credit cards.

Today, the average interest rate is down to 12% for unsecured personal loans with terms ranging from 12 to 60 months, but there are a lot of banks offering personal loan rates lower than that.

Compared to average credit card rates of 11.68%, the average personal loan rates are slightly higher, but because revolving credit card accounts have variable interest rates compared to the fixed rates of personal loans, personal loans are the better bargain. And, of course, 33% of credit card issuers have raised their interest rates this year, many as high as 29.99% or more.

To get some idea of how much money those lower personal loan rates can save when used for debt consolidation, take a look at these figures:

• Today the average household carries $8,924 in total credit card debt. If that household is among the millions whose interest rates have been increased to 29.99%, the five-year, payoff will cost $288.67 per month.
• In comparison, if the credit card debt were paid off with the average personal loan rate of 12%, in a five-year payment period the monthly cost would be only $201.23—a savings of $87.44 per month or $5,246.40 over the life of the loan.
• The average interest rate for balance transfer cards is now 14.54%, so if the card holders in the average household consider that route for paying off high interest cards, they can expect to pay $210.15 monthly, in addition to the balance transfer fee that is typically 3%.
• So again, using the credit card debt of an average family, the balance transfer fee will be an additional $267.72.
• The total savings of using a personal loan to pay off credit card debt compared shifting it to a balance transfer card is $802.92.

When you do the math, personal loan rates are by far the better bargain.

Sometimes balancing a budget is like standing on the bank of a creek, wondering if you can make it to the other side in a single leap without landing in the water. Those are the times short-term personal loans can help bridge the gap.

Examples from my own life:

• My husband bit into a piece of pizza this week and broke off a molar. He saw the dentist yesterday and was quoted $1,179 for a crown. Right now he’s in no pain, but if that changes, we’ll probably look into short-term personal loans.
• I’ve lost my bifocals. Under ordinary circumstances I could replace them without much of a hardship, but the holidays are upon us, and our budget is stretched thin already.
• Ordinarily, we’re able to cover additional holiday expenses without going into debt, but this year we committed to buying gifts for three boys from a disadvantaged family … and then a family friend suffered a serious injury, and we offered to help buy gifts for her two girls, too.  Given the financial situations of both families, even short-term personal loans are out of reach for them, but my husband and I still have jobs, so will be able to acquire loans if we have to.
• And, in the midst of all this, our dog has gotten sick, and this week’s trip to the vet’s office cost nearly $400.

We’ve never taken out short-term personal loans in the past, but there does seem to be a “perfect storm” gathering, and if the rains come, the creek may become dangerously flooded.

While short-term personal loans sometimes come with high interest rates, because so many credit card issuers have recently jacked-up their interest rates, the short-term personal loans may actually be cheaper. Besides that, many people have elected to close their credit card accounts to avoid the higher interest rates, meaning short-term personal loans may be their own option for making it to the other side of the creek.