Despite your best efforts, unexpected emergencies can crop up and leave you scrambling to find ways to cover the expenses. Instead of financing the costs with a credit card, you might want to consider taking out a small personal loan (for a few thousand dollars or less). A small loan might offer a lower interest rate than you would find on a credit card. As a bonus, making regular payments on a personal loan will add some variety to your credit mix — one of the key elements of a high credit score. In order to protect your credit, it’s critical to do your research when you are considering taking out a small loan. Even though you might be tempted to resort to the quickest or easiest option, that probably wouldn’t be the right choice for your credit. Here are the steps to take when you need a small loan.
Contact Your Local Credit Union
A credit union can often extend very competitive loan rates for consumers with less-than-stellar credit scores. You will likely have to become a member before you can take out a loan with a credit union, but this could be a savvy financial move anyway. Be sure to check out the requirements for holding an account at a credit union. Along with lower interest rates, credit union loans also boast more flexible payment arrangements and, when evaluating your loan application, will typically review more than just your credit score. Because of the lower rates they offer, a credit union could be your least expensive option when you need a small loan.
Research Online Lenders
The loan market is rife with online lenders — some great, some good, and some downright predatory. As with most loans, you will generally need to present a decent credit score to qualify for the most favorable interest rates on these small loans. However, there are plenty of online lenders that cater especially to borrowers with middling or poor credit. To protect yourself, you’ll want to look for a lender offering fixed monthly payments for a short term, such as between three and 12 months. That limits the amount of interest you’ll ultimately be forking over.
Explore Small Loan Features
Comparing the APR rates on small loans is essential. The next step, then, should be nailing down exactly what you need from the loan. Make a list of your “must have” features, as well as the ones that would just be “nice to have.” Would you like the flexibility of being able to reschedule a payment? Is a loan with no introductory fees a must? Could your lender possibly restructure your interest rate while you’re in the middle of the repayment period? Make sure you investigate all the features of your small loan candidates; the added convenience and flexibility could be just as important as the APR rate.
All banks offer personal loans, but you’re more likely to find friendly service and an understanding ear at your neighborhood financial institution. Similar to credit unions, local banks may offer the small personal loan amounts that you need, at a favorable rate. You can also resort to more well-known nationally run banks, but these are more likely to require higher credit scores among the loan application credentials, and some will not consider approving loans below a certain amount. It’s worth first checking with the bank where you currently hold accounts, as they may offer a discounted rate for already established customers.
What to Avoid
Some consumers pop into the nearest payday loan shop when they need a small loan. Payday loan shops are known for offering small loans to those with credit problems. But if you can, it’s best to avoid this quick fix at all costs. Payday loans generally come loaded with fees and steep interest rates, which will only sap your finances further. You might even end up having to take out another loan to cover the costs of the initial one, which could set a vicious cycle in motion.
Turn to Us for More Help
We know just how important it is to have a clean credit report when you need a small loan. After all, the better your credit appears to a new lender, the more attractive — and inexpensive — your loan package will ultimately be. Give us a shout today at Ovation Credit and find out how we can help you realize your low-cost personal loan goals.