Does the reason for a personal loan matter?
How Does Loan Purpose Affect Your Loan? Your reason for getting a personal loan not only helps determine whether or not you'll be approved, but can have an influence on the type of loan you can get, as well as the loan amount, and even the interest rate.
- Debt consolidation.
- Home improvement projects.
- Emergency expenses.
- Vehicle financing.
- Alternative to payday loans.
- Moving costs.
- Large purchases.
- Wedding expenses.
You can generally use a personal loan for almost anything, including a wedding, a vacation, a medical bill, an emergency circ*mstance and more. However, there are also some expenses a personal loan usually can't be used to cover.
LightStream Personal Loans
Excellent credit required for lowest rate. Rates vary by loan purpose. There isn't really a hard-and-fast rule about what the loan must be used for, but you'll usually have to explain the purpose of the loan when you apply for it.
- Consolidate debt.
- Cover emergency expenses.
- Home improvement projects.
- Finance funeral expenses.
- Help cover moving costs.
- Make a large purchase.
- Cover a major life milestone.
- Pay for a vacation.
- Give your credit a little boost. ...
- Determine how much you need. ...
- Add a cosigner. ...
- Don't settle for the first lender that comes your way. ...
- Double and triple check your application.
- 'I need to get an extra insurance quote due to … ...
- 'I can't believe how much work the house needs before we move in' ...
- 'Please don't tell my spouse what's on my credit report' ...
- 'I'm still working out the details on my down payment'
- Taking out a longer loan than necessary.
- Not shopping around for the best offers.
- Not considering your credit score.
- Overlooking fees and penalties.
- Not reading the fine print.
Lenders have the ultimate decision-making power when it comes to who they will provide loans to. In general, though, if you're denied a personal loan, it most likely has to do with your credit score, income situation, or DTI. Before you apply, check the lender's criteria to determine if you're likely to qualify.
Credit Score Needed to Get a Personal Loan
According to the credit bureau Experian, It's possible to get a personal loan with a lower credit score, but a FICO® Score☉ that falls in the good range (670-739) or higher will give you access to a broader array of lenders and better interest rates.
Do personal loans always get approved?
You are almost certain to be approved by at least some lenders for a personal loan if you have good credit, make enough money to easily repay your loan, have been at your job for a while, and your debt-to-income ratio is below 35% -- even when factoring in the payment on the loan you're applying for.
- Proof of your identity. First and foremost, you have to prove to lenders that you are who you say you are. ...
- Proof of address. ...
- Proof of income. ...
- Recurring monthly expenses. ...
- Your credit score. ...
- Your purpose for the personal loan.
The reason why you're borrowing could impact the terms of your loan, including your interest rate, available repayment terms, potential loan amounts, and more. Note that some lenders don't offer personal loans in certain scenarios.
Make your payments on time
Paying your bills on time is the most important thing you can do to help raise your score.
Making late payments
The late payment remains even if you pay the past-due balance. Your payment history may be a primary factor in determining your credit scores, depending on the credit scoring model (the way scores are calculated) used. Late payments can negatively impact credit scores.
- Being prepared.
- Having good knowledge of your file.
- Ensuring your application is complete and up to date.
- Presenting realistic figures (draw comparisons with competitors, ask that they be verified by an expert…)
- Being realistic!
In general, lenders extend $30,000 loans to borrowers with good to excellent credit, which is typically 670 and higher. But there may be lenders who lend to borrowers with bad credit. If you're having difficulty qualifying, you may consider getting a cosigner or co-borrower to help you get approved for the loan.
In general, people who have a FICO® Score 8 or FICO® Score 9 of at least 670 or a VantageScore 3.0 or VantageScore 4.0 of at least 661 are considered to have good credit or excellent credit, which means they may find it easier to qualify for a personal loan.
Consolidating debt
If you have credit and store card debt with high interest rates then a personal loan is one of the best reasons to borrow money. You'll only have one debt to worry about and you should be able to get debt-free faster. You could also consider a 0% credit card transfer.
- Payday loans. Payday loans are the worst type of loan to get, because they offer very high interest rates and short repayment terms. ...
- Title loans. Title loans are another high-interest loan to avoid due to its high fees and requirement of using your own car for collateral. ...
- Cash advances. ...
- Family loans.
What are two things you should consider before taking a loan Why?
- Look at the Interest Rates. Interest rates play an important role in determining how much you pay back each month. ...
- Look at the Terms or Length of the Loan. ...
- Review the Lender's Reputation. ...
- Consider Access to the Lender.
Fees and penalties can be high
Personal loans may come with fees and penalties that can drive up the cost of borrowing. Some loans come with origination fees of 1 percent to 6 percent of the loan amount.
A personal loan can affect your credit score in a number of ways—both good and bad. Taking out a personal loan isn't bad for your credit score in and of itself. However, it may affect your overall score for the short term and make it more difficult for you to obtain additional credit before that new loan is paid back.
You can have as many loans as lenders will approve for you, but there are practical limitations. The more personal loans you have, the harder it will be to qualify for another loan. Every time you take out a loan, you'll increase your debt-to-income (DTI) ratio.
Paying down debts, increasing your income, applying with a co-signer or co-borrower and looking for lenders that specialize in loans within your credit band could increase your approval odds.
