You have been thinking about taking out a personal loan for some time now. Normally, you would just save up the money, but you need a reasonably large sum of cash to be made available as soon as possible. A personal loan is one option available to you at the present moment. You may want to use the money to pay off a few bills, get a medical procedure done or to take a much-needed vacation.
Whatever the reason, taking out a personal loan is going to help you financially to accomplish some important goal you have in mind. What you may not have considered, however, is that taking out a personal loan could have a considerable impact on your credit score for a number of different reasons. It is important to understand that the impact on your credit score could be either positive or negative depending on your circumstances.
Get the Soft Check
Shopping around for the personal loan that best suits your purposes will require a little forethought on your part. When it comes to finding the right personal loan, you will need to keep a few ideas in mind:
- Your actual financial need
- The loan amount you will settle for
- Principle and interest
- The duration of the loan
- The duration of the loan
- Doing soft checks
All these factors must be weighed and considered to ensure that you do not get yourself into a bad situation with a personal loan that could seriously damage your credit score. However, you might be thinking, what in the world is a soft check.
When a lender decides to make you a loan offer, it is because they have taken the time to check up on your credit history. When this happens, it will either impact your credit score or not at all. When an offer does not impact your credit score, this is called a soft check. You will definitely want to avoid lenders who do not do soft checks to prevent your credit score from decreasing.
This will prevent your credit score from taking a hit while you are shopping around for the right personal loan to meet your needs. So, it never hurts to call around to various lenders to find out which ones do soft checks and which ones do not. Sure, it might be a little extra leg work on your part, but your credit score will be easier to maintain at a higher level if you do your due diligence in this area.
As with any form of borrowed money, a personal loan must be paid back. This can be a problem if you get a personal loan that charges you a large amount to be paid back each month. The last thing you want to do is fall behind on your payments or completely default on the loan. If you do that, then the lender may report negatively to the major credit agencies about your negligent payment habits.
The consequence of this will be negative items on your credit report that will begin to chip away at your credit score. On the other hand, if you never make any late payments or you pay more often than is required, you could find that your credit score increases instead. This is always a better outcome, so it is a good idea to develop the habit of paying on time and to consider even making payments more often than is expected by the lender.
Effectively Paying Down Debt with a Personal Loan
You might be considering that a personal loan might be an easy way to approach paying down a lot of already accrued debt. This is definitely one way to consolidate other sources of debt under one payment plan and reduce the amount of your monthly payments towards your overall bills. Taking this action can even help you to have more breathing room with your finances.
The good news is that paying off other sources of revolving debt with a personal loan from Courtesy Loans can be an excellent way to improve your credit score. In addition, as you continue paying off your personal loan, your debt to income ratio should improve as well. This will inevitably make you a more attractive risk to lenders who are seeking to lend money to people with better than average credit scores.