Although the most popular place to get a personal loan is at a credit union or a bank, a zero interest credit card or an online lender might also be great alternatives. The worst thing you can do is start talking to a lender without any knowledge of your credit score or the loan terms you are planning on signing. Work on researching the best rates for your credit score. Remember, the worse your score is the higher the rates tend to be.

It’s also important to know the difference between loans. Your personal loan may be locked onto a higher rate than a car loan since those are secured and backed by assets. The loan you’re going after is going to have less security behind it for the lender. That is why it is instrumental to work on improving your score before applying, the higher your score is the less you will end up paying back.

 Credit is Key

To be offered without a hitch for a personal loan make sure your credit score is anywhere from 720 to 850. These are the best scores you can get and lenders see you less of a risk. Not to mention, when you apply for most credit cards you are introduced with a 0% rate which is less of a risk to yourself as well.

If your credit score drops between 690 and 719, you are what is known as a good credit risk. Although you might not be approved for a zero interest credit card, you can be offered much lower rates on personal loans and lower credit card rates.

The average credit score is 630 to 689. It shows that you have a reputable credit history and a decent income which leaves you with plenty of reasonable rates for loans and credit cards. Although you may be paying higher than the above tier scores, finding okay rates will not be as much as a challenge than if you had bad credit.

The last level of credit drops down to 300 to 629 where the “bad credit” exists. People with this credit score have less access to reasonable rates and might even need a cosigner to get a credit card or personal loan.

 Where Can You Find a Loan?

When scoping out a personal loan, start in your community. Your local bank will most likely give you a good rate if you’re a long time customer. Not to mention, credit unions offer acceptable rates since they are not for profit. When you get the rates, don’t sign on right away. It’s suggested you do some research and find the best rate for your financial future. Signing onto a rate too quickly makes you look desperate and the bank or financial institution might try to upsell you.

Online lenders are also a great source of help since most of them offer lower rates as they operate online. However, online lending comes in many other forms than physical locations. Some lenders offer competitive rates with larger loans while others may throw in different features and gimmicks to attract young personal loan shoppers.

One of the best features, in my opinion, of online lenders is that they don’t leave as much of a heavy toll on your credit as much as banks or credit unions. These soft pulls on your credit score are ideal for people with bad credit who are working on improving their score.

 How To Pick the Right Lender

There is more to take into consideration than just the APR. Because of the competitive nature of the personal loan market, lenders often offer extras to stand out from the crowd. Some offer debt counseling services, unemployment guarantees, and ways of determining your eligibility that go beyond your credit score. Look for things like low late fees or the ability to reschedule a payment.

There are also lenders who create loans for specific purposes. Some lenders deal only with consolidating credit card debt. Others only allow loans to be used for home improvements. Still, though, the large majority of lenders do not have restrictions on what the money can be used for.

 When Should You Take Out a Personal Loan?

We do not recommend taking out personal loans very often. You should not borrow money simply because you can. Don’t take out a loan just to push back the inevitable. You should only take out a personal loan if it will positively benefit your financial future. That is, your loan should only be used as a piece of a larger debt management plan.

If you intend to use the money for a vacation, home projects, or a car, there are better options out there. For those with good credit scores, a secured loan or credit card will usually be cheaper. If you do not have great credit, seriously examine your debt and income before borrowing any money.

If you are looking for a way to consolidate your debt, there are only a few reasons why you should be considering a personal loan. If doing so will help you to become debt free quickly or avoid taking on more debt, then you should take out the loan. However, if a personal loan will not do either of these things for you, do not borrow money until your credit improves.

A final word of warning, never ever take out a high-interest installment or payday loan. These are never the answer and will most likely cause more problems than they will fix. Only look for personal loans at your local bank or credit union.

You may also want to get in contact with a debt counselor through the National Foundation for Credit Counseling. They are able to provide advice and can help you to manage your debt and save money.