Personal finance is intimidating, and a downright nightmare in some cases, to some of us. I know the world of loans was confusing to me! There is so much information out there, it can almost feel like an overload.
If you’re not even sure where to start, try using this guide to help you. It’s good to keep in mind that you can seek out international loans as well as ones from your home country. That was something I had honestly never considered before, until I did my research! International loans might not be for everyone of course, but it’s something to remember.
When you’re considering getting a loan, there are a lot of things you need to think about beforehand. If you’re looking for some other resources on how to figure out getting a loan, you can look at CNBC or here for Space Coast Credit Union. That being said, I’ll explain in easier terms – or at least try to cut down on the jargon!
Figure Out What Kind of Borrower You Are
This step is vital to finding a loan for you. If you don’t understand why, it’s because credit lenders look at this information before giving you a loan. The rates of interest can also vary depending on this. Probably the most important facet of what kind of borrower you are, is your credit score.
Credit scores fall between the range of 300 to 850. The lower end means you have poor credit, and the higher end means you have good credit. If you’re confused by these terms, don’t worry! It might sound confusing, but it really isn’t.
Credit score is used to determine how likely you are to pay back money that you borrow. It is impacted by the loans you already have (such as student loans or private loans) and credit cards, primarily. There are other factors too, but these are the ones I will focus on.
Categories of Credit
Lending companies sort potential borrowers into five categories of credit. These are deep subprime, subprime, near-prime, prime, and super-prime. While these words might sound unfamiliar, they’re really not too complicated. It’s worth noting that there are criticisms of these categories, but they remain important for both borrower and lender safety.
These categories determine the interest rates you can get and even the loans you can qualify for. Prime candidates get better rates because they have more proven credit history. That is why building up your history and score are so important as you pursue a personal loan.
What These Categories Mean
Let me explain these categories. Starting with deep subprime, these are scores 580 or below. This means your history with lenders is probably not great. You may have missed several payments or have a lot of loans without any proven credit.
Subprime scores are between 580 and 619. Obviously, these scores are still not optimal. You may have experienced some of the same issues as deep subprime lenders, but not at severe. It can be difficult to find optimal interest rates still.
Near-prime is where a lot of newer credit holders fall. This is between 620 and 659. I was still at this point when I first graduated from my undergraduate university. My credit score with my student loans was about 640. It’s not the worst place to be for sure, and usually a sign of little credit history. That’s totally okay!
Prime credit scores are between 660 and 719. This means you’re in a pretty good place in terms of your finances. You have credit history and have proven that you make payments on time!
Super-prime scores are 720 and above. This is the best spot to be in terms of credit, and the goal of many borrowers. If you’re in this category you will likely get very good rates on your loans from lenders.
Why it Matters
This might seem confusing. Why should this sort of thing matter? There’s a lot of reasons why. Your level of credit and category shows lenders like billigeforbrukslån.no/ what risk you might pose to them. It’s not only for their benefit though, of course.
It’s good to know for yourself as well. This way, if you find that you aren’t getting good interest rates or loan opportunities, you have some idea why. Knowing your credit score and category is necessary for tracking your own financial health!
Decide What Kind of Loan You Need
There are many different kinds of loans. Private loans, school loans – it’s really important to know what kind you are looking for. A home loan, for example, is a mortgage. There are also small business loans if you’re looking to start up. That sort of thing can cover various expenses for your business.
You can get loans for purchasing a car or consolidating other debts as well. Before you apply for one, you should determine for yourself what your needs are. That will be dependent on your own financial goals, but I explained several possibilities!
Figure Out What Kind of Lender You Want to Borrow From
This might seem like an obvious step, but it’s actually quite vital. You can’t decide to take out a loan without researching your options first! If you’re curious about this sort of thing you can check out a blog like this one. Resources like that and this article can help you figure this out when you decide to embark in the process of getting a loan!
Figure Out Your Situation
While this might also feel like a no-brainer, I think it is still worth mentioning. A lot of people might not know that lending companies have certain bonuses for people of certain walks of life. An example of this might be a good mortgage rate if you are a first-time home buyer!
It’s always worth doing the research before you do anything that might impact your financial well-being. That is why I’m saying it – credit health does matter to your future. I never really understood that before. Before I started to understand why credit matters, I didn’t even want to get a credit card – let along take out a loan.
With the way schooling works in the United States, I was thrust into the world of student loans quite quickly. I had no real idea what I was doing, and what kinds of loan companies were out there. While there was information available, I felt really overwhelmed by it. A lot of it out there seems to be filled with jargon and confusing terms.
That’s why I think articles like this are important for understanding financial health. Simple explanations of these vital life topics are helpful in navigating the world of loans in particular. Before considering a loan, you need to consider your own finances both short-term and long term.
After all, you don’t want to end up stuck. Don’t take on several loans at once that you don’t think you’ll be able to pay back. Know your own financial situation, because lenders will be looking into that. You can save yourself a lot of trouble by already knowing!
Loans Aren’t as Scary as They May Seem
While it is quite intimidating to approach the topic of personal finances, it’s really not as bad as it might appear. The more you start to learn and get familiar with these terms, the better off you’ll be. Just remember to keep track of your own financial health as you start investigating different loans.
The different categories of credit level and the various options out there for loan types will all impact your search. You might not get the most amazing interest rates at first, especially as a new borrower. That’s okay – you’ll get there eventually if you set goals!
If you set your mind to achieving those long-term and short-term goals, you’ll be able to boost your credit health and get good rates on loans. You just have to set your mind to it!