When you are in a financial bind
Sometimes getting a loan can seem like an impossible task. However, if you have good credit, then the task becomes much easier. It is never wise to go without a loan because sooner or later you will need one. In fact, it would be a good idea to have several loans. One loan to pay off another loan and so on. If you use your resources intelligently, this can be very beneficial to you.
As you start comparing loans, you will find that your bad credit is often an issue when it comes to borrowing money. To help you get started, l discuss eight types of personal loans with a professional credit counselor. They will examine your situation and help you determine which type of loan is right for you. ll also share things that you should watch for as you choose your loan.
These loans can help the borrower build credit and get a better interest rate in the future
One type of loan that can be used by borrowers with less than perfect credit is credit-builder loans. Credit-builder loans are different from other types of loans in many ways. The most important thing to note about credit-builder loans is that the interest rate that is offered may not always be the lowest available. This is because a credit-builder loan is a risk-based loan and the lender has to consider the borrower’s ability to pay in order to determine the interest rate.
In addition, the interest rate that is offered may also depend on your current credit score and/or credit history. Some lenders may base the interest rate on the borrower’s credit score and/or history. For example, some lenders may offer a lower interest rate if the borrower has a good credit score and/or a long credit history.
Another type of loan is the ARMs or adjustable rate mortgage
This loan requires no down payment and does not require a monthly payment. In short, the lender determines the loan amount and interest rate in accordance with the loan amount and the borrower’s credit score. ARMs often have loan amounts that range from several thousand dollars to several hundred thousand dollars, so they can be used for large purchases such as homes, boats, planes, etc.
Finally, there is the FHA loan. FHA loans are available to persons who do not qualify for other types of mortgage interest rate or to people with low credit scores. However, the interest rates and terms are stricter than those for traditional mortgages because the lending requirements are higher. Because these loans have a higher loan to value ratio, the interest rate and term length are lower than traditional mortgages. Typically, a person who has a lower FICO score and a longer loan term length will get a lower mortgage interest rate and terms than someone with higher credit scores and a shorter loan term.