Why A Personal Loan Could Protect Your Credit Score Better Than A Credit Card

A personal loan is a loan that a financial institution (usually a bank) will make to you for a fixed period of time. The loan can be secured or unsecured.

Why take a loan and not use a credit card?

To protect your credit score you should not use more than 30% of your available balance on your credit cards and some experts even recommend using no more than 10%. With this in mind if you need a loan for a significant amount and do not want to affect your credit score organising a personal loan is going to be a better option for your credit score.

How much can I borrow?

Much will depend on your income and your credit history. It’s important to provide accurate information when you complete your loan application since the lender can check your story against the records held by America’s 3 credit agencies. (Besides providing false information is considered fraud). Banks will loan generally loan anything from a few thousand Dollars up to $100,000.

What are the benefits of taking a personal loan?

If your loan is unsecured there are no upfront fees for taking a loan. The bank or lender make their money from the interest you pay them over the life of the loan. With this kind of loan you can secure a fixed interest rate for the life of the loan. This means there is no risk of your monthly payment increasing if interest rates start to rise.

What advantage would there be to taking a secured personal loan?

A secured personal loan is a loan where you put up something that you own as security for the bank or lender. The advantage of offering the bank or lender security is that your annual percentage rate (effectively how much you pay the lender each year for the privilege of the loan) will be lower. However it also means that if you are unable to make the monthly loan repayments, that the bank will take whatever security you have offered. We only recommend this kind of loan if you know that you can make the monthly repayments for the life of the loan without any problem.