How Is The Interest Rate Determined For A Personal Loan

There are many variables that can impact the interest rate of your personal loan. Knowing in advance that your income, debt to income ratio, loan size, and the payment timeline can impact your interest rate can help you plan to make sure you are in a position to get the best loan possible. 

How You Can Get And Use A Personal Line Of Credit

Credit cards are the most commonly used lines of credit, but they aren’t your only option. A personal line of credit is an excellent option for you to have. You will be approved for a certain amount of money that you can spend when you please. It can sit there for as long as you need, waiting to be spent. You don’t have to borrow or pay interest on it until you are ready to start accessing the funds.

How Does Line Of Credit Work?

When you have your line of credit, there are two different periods, the “draw period” and “ repayment period.” The draw period is when you have to access the credit, you can borrow the money you need. You eventually will have to make the payments back but are only required to make minimum payments. The repayment period is when you’ll have to repay the principal and interest on the loan. A portion of payments goes toward the principal and can be added back to the credit line for you to have access to in the future.

How Do I Get A Personal Line Of Credit?

To apply for a personal loan, you need to apply with your bank or a credit union. When applying, you’ll need to be prepared to provide personal information such as your annual income, employer, and your home address. Once all the information is provided, your lender will then start to do a credit check. Usually, the application process can be pretty quick, while other times, it may take a few days to find out if you were approved or not.

Is A Personal Line Of Credit Secured Or Unsecured?

Typically a personal line of credit is unsecured. Having an unsecured credit line is hard for people to get approved for because it’s such a high risk for the bank to loan out that money and not have anything to fall back on if payments aren’t made when they are supposed to be. To even be approved for an unsecured line, you need an outstanding credit score and a history of paying back your debts and making payments on time. Most credit lines are secured, which means that the borrower is required to put up collateral. For example, the bank would be able to put a lien against your home or your vehicle.

When Should I Use My Line Of Credit?

When you are applying or have taken out a loan, it’s important not to go overboard and start thinking about your “wants” but think about your “needs.” Your personal line of credit wouldn’t be best used to go out and spend money on shopping. It should be used if you had some sort of financial emergency, and you needed to pay your house payment, or something else serious came up. You will have to make payments back, so use it wisely.

Can You Increase Your Line Of Credit?

Yes, you can. The process to increase your line of credit is actually not as hard as it may seem. You can simply just call over the phone and talk to customer service if you don’t want to go in. Lenders can either increase or decrease your amount of money at their discretion. As long as you have a good history, are consistent with making your payments when they are due and are responsible for your line of credit, you’ll most likely get approved. Sometimes when asking your lender for an increase, they can automatically do that for you.

 

 

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