More than a Credit Score: How to Get a Good Loan on Your Own
Wednesday, August 31, 2016, 6:00 AM | Leave Comment
Interest rates for auto and mortgage loans are at unprecedented lows thanks to the Federal Reserve’s monetary policy.
Since early 2016, the average rate for a fixed mortgage has decreased from 4.01 to 3.62 percent.
Additionally, five-year auto loans have average rates as low as 4.29 percent.
If you want to take advantage of the best deals in the market, here’s how you can secure a good loan on your own.
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Start Checking Your FICO Score
To secure a loan, you need what’s called a FICO score, which measures your likelihood of paying back your loan on time.
Lenders use your score in determining what your interest rate on a loan will be and how much you can borrow.
Your FICO scores can come from three credit bureau reporting companies: Experian, Equifax, and TransUnion.
There are different FICO scores depending on what type of loan you apply for. FICO scores of 720 to 850 are prime rates and what will provide the best deal. 690 to 719 won’t qualify you for the best rate, but loans are still plenty.
With an average credit risk of 630 to 689, the rates will be higher, but with enough income, reasonable rates won’t be hard to come by.
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Where to Find a Loan
You can go to your local bank or credit union to sign loan paperwork. Depending on your loan length, the likelihood of receiving a prime rate and desired loan amount is high.
Credit unions like TruPartner Credit Union usually offer lower rates than the banks because of their not-for-profit status.
For prime customers, online lenders including Lending Club work by checking your credit and giving you a quote.
Approved loans are electronically sent your bank account within several days.
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What if You Have No credit or Bad Credit?
For college students with no credit history, federal student loans require no credit checks and help you build your credit.
Filling out the FAFSA is where you begin if you are an American citizen with provable financial need.
With bad credit your options are limited, but if you’re a homeowner, home equity loans use the value of your home as collateral, allowing for consolidation of debt.
Having a good credit score helps you get the best loan terms, but loan solutions for lower tier borrowers also exist.
Always check with your local bank or credit union before exploring other loan possibilities.
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