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Risk-based pricing

As with lenders of other forms of credit, personal loan lenders use risk-based pricing. The worse your credit is, the higher the interest rate on your loan. When applying for a personal loan, its a good idea to review your credit report and your credit score.

The myBankrate feature lets you review your credit report and credit score for free.

High rates make it harder to justify the loan

Borrowers with poor credit can see interest rates as high as 36% on their personal loans. High interest rates can deter people considering a personal loan, not matter why they want to take out the loan.

You wont get much bang for your buck, using a high interest rate loan for debt consolidation, for example. Id also argue against paying 36% to finance a vacation or to purchase a car.

Wait it out, if you can

The point is that keeping your credit history clean, paying as agreed with no late payments, has real benefits when you need to apply for credit.

The myBankrate feature lets you review your credit report and credit score for free.

If you have bad credit and the need for a personal loan isnt immediate, wait for your credit score to improve before taking out the loan. While most negative information drops off your credit report after 7 years, it doesnt take 7 years for your credit score to improve.