Easy Ways to Get More Out of a Personal Loan
Posted: July 6 2020
By: Daniela Bucay
You may consider taking out a loan for a variety of reasons: to meet immediate cash needs, to build your credit history, or to consolidate existing higher-interest debts. Whatever the reason, once you decide to take out a loan, you will want to make sure that you have taken some steps to get the most out of the loan. Read on below for tips on how to maximize your loan so that it not only helps you out now, but helps you in the future!
If you need short-term cash for certain basic expenses, such as utilities, a nonprofit may be able to help. For example, in Houston, we work with nonprofits that can help with temporary assistance for urgent expenses. You definitely do not want to take out a loan if there is another less expensive way to pay down whatever debt you owe.
If you want to take out a loan to consolidate other types of debt, we first encourage you to reach out to a nonprofit credit counselor. They can be really helpful in figuring out if a loan is the right way to go!
Many online loan marketplaces, like Lending Tree or Credit Sesame, allow you to see if you prequalify for a loan before you actually submit an application, without going on your credit report. Always make sure you ask if the application will go on your credit report before you submit it!
Also, make sure to compare the loans fairly, by looking not only at the interest rate, but the payment term, as well as any fees. Fees and payment schedule can play a big role in determining the total cost of the loan, and you need to know how much you can actually afford with all of that factored in before you apply for the loan.
Another important factor to consider when shopping around is whether or not the lender reports to the credit bureaus. Some lenders don't report at all, others report to one or two of the 3 major credit bureaus, and others report to all 3 (hint: Fig reports to all of them). You want to make sure the lender reports to all the bureaus so that having a loan can help your credit score. That way, you can think of the cost of the loan as also going towards boosting your credit!
Borrow Only What You Need
This tip is fairly straightforward. You should only borrow what you need to ensure that you do not take on unnecessary debt, which can hurt your credit by increasing your debt load and make the loan harder to repay. You want to avoid taking out more than you need, even if having some extra cash would be nice (isn't it always?), because loans accrue interest. For a more detailed breakdown of interest and how to use it when evaluating a loan, see this post.
Set It and Forget It
Unless you have a very complicated budget to manage, or you simply do not trust your lender (in which case, why are you doing business with them?), we always recommend setting your payment schedule as soon as you take out the loan, setting up reminders on your calendar, and leaving the loan on autopay.
It pains us to see customers remove themselves from automatic ACH drafts, only to fall behind on payments that they could have well afforded, simply because they forgot! Remember, loans can really help your credit score by showing creditors that you can manage different types of credit over time, but they can also hurt your score if you rack up delayed payments or even worse, default.
Not only is putting your loan on autopay convenient, but it may also save you money. Some lenders actually charge less for payments when made via ACH withdrawals, as opposed to debit card or check.
Pay on Time, or Talk to Your Creditor
The number one way to actually get your money's worth from a loan is to pay your loan on time (or make frequent payments early, to save on interest). Otherwise, you can rack up fees and damage your credit severely. If, for whatever reason, you cannot make your payment on time, reach out to your creditor early. Give them plenty of time to lay out the options available that will protect your credit.
At Fig, we send you payment reminders 7 days before your payment is due, and every couple of days thereafter. We also give you until 3 p.m. on the business day before your payment is due to make any changes. Keep in touch with us, and we promise we'll do everything we can to keep you on track and on budget.
Check on Your Credit
After you have taken out the loan and started making payments, make sure to check your credit periodically to ensure that the lender is reporting accurately on your loan. Any reporting errors can really hurt your score! Most lenders will be happy to correct any errors made in good faith, but you should familiarize yourself with the process for disputing credit reporting errors in case you need to do so down the line.
We hope these tips help you get the most value out of your loans, or any other credit product you use. Do you have any tricks to maximize your credit? Any ideas for how to save on a loan? We're listening at firstname.lastname@example.org, Facebook, Instagram, and Twitter.
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