Things to Know About Online Personal Loans For Fair Credit and Why Credit Scores Matter

The online world offers many wonders, and included in these are the vast services they offer. One such service is online personal loans, where applying for one got even more convenient and appealing due to their competitive rates. In this case, however, maintaining your credit score is essential.

Many get discouraged when their scores fall under the fair category, but it is still possible to apply for one. A vital question you should ask is, how important are credit scores exactly? Here are the top reasons why.

1. Credit Scores Attract Potential Lenders

Usually, a person’s credit score ranges from 300 to 850, where scores higher than 700 are considered excellent. In short, the higher your score is, the more it appeals to future lenders. There is no doubt that those with exceptional scores can qualify for loans easier but do not fret, for there are available online personal loans for fair credit.

Most people who have fair credit usually find it challenging to attract reputable companies. Some are even prone to predatory lenders. It is necessary then that you,

• Check the lender’s minimum credit score requirement

• Compare annual percentage rates (APR) with other mortgage lenders

• Check their repayment terms and fees for fair credit

• Find legit lenders that allow for co-signed loans

2. Credit Scores Determine the Rates You Pay

The amount of rate you receive will depend on how low or high your score is. Obviously, higher scores will give you better terms for the type of loan you applied for and will get you lower interest rates.

On the other hand, lenders are skeptical about offering loans to people with fair credit as they are considered greater risks. In fact, in the FICO credit score range, they are considered to be subprime borrowers. However, there are still several mortgage lenders who can consider working with consumers in this range.

It is best to note, though, that applying for fair-credit loans tend to have higher-paying rates compared to those who have good and excellent credit scores.

3. Credit Scores Give You the Best Deals

In essence, more excellent scores would mean more deals, which means you are able to rent a good apartment, get the best cell phone services, insurance premiums, and even get the car of your dreams. Just how cool is that? A good credit score opens the door of opportunities and options available for you.

Credit scores are more than just the loans you can get and the rates you pay but also about the benefits you can access. They comprise the more significant part of your major financial goals.

4. Credit Scores Serve as Your Pass for a Loan Qualification

Generally, credit scores determine if you are qualified for a loan or not. The higher your score, the more you are qualified for a higher mortgage. At the same time, one perk is that you will not compete with other borrowers. Rather, lender companies will compete for you as they seek for best customers (those with excellent credit scores, so to speak).

5. Credit Scores Secure Your Present and Future

As long as you keep up with a good credit score, your quality of living will be secured. From buying or renting a home, purchasing a car, down to looking for a job, or starting a business, your credit scores will reflect and demonstrate your financial responsibility. Even when you reach the grand age of 60 or are already retired, you can still benefit from your credit scores.

For retirees or homeowners who are 62 years or older, they can opt to apply for a reverse mortgage to help with daily living expenses and health care payments.

While it is true that good to excellent credit scorers gain a lot and better benefits than those who have poor to fair credit, some online lenders also look at other factors other than credit scores such as credit reports, debt-to-income ratio (total expenses against monthly income), and employment history.

Take note of these factors that make or break your credit scores:

• Payment history

• Total debt

• Public records (such as bankruptcy)

• Length of credit history

• Types and how many credit accounts you have

Having fair credit doesn’t necessarily hinder you from applying for an online personal loan. You can follow some of these suggestions if you want to qualify for one:

• Narrow down lender options by checking your credit scores. Based on your credit score, it will help you determine mortgage lenders worth applying to.

• Consider getting prequalified with multiple lenders. Prequalification allows you to compare rates and terms that you may receive. This process entails giving personal information, financial details, and desired loan amounts for a soft credit check. Don’t worry; this won’t affect your credit score.

• Consider adding a trusted co-signer when applying for a loan. Though getting a co-signer has potential risks, they still could help you obtain financing and build your credentials to qualify for a loan.

Takeaway

Some might say that numbers should not define who they are, but it does matter with credit scores. Remember, your score depicts your creditworthiness. Though some companies still offer loaning opportunities to those in the fair credit range, it is still best to maintain a high score for higher and better options.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes