Guide to Personal Loans

What’s more important: a low monthly payment or a low APR?

When checking your rates for a personal loan, it can be difficult to weigh all your options. Some people say you should go for the offer that gives you the lowest monthly payment. Others say you should go for the lowest APR because it’s the best value.

The truth is that there’s no one right answer. The real question is whether you want to save on or help manage payments. Do you want a higher monthly payment over a short period of time or a lower monthly payment over a longer period of time? No one knows you or your money better, and even if a low APR sounds like it’s the better option, sometimes it’s worth thinking it through and doing the math to figure out what will work best for you.

What does it mean that my personal loan is unsecured?

In addition to considering factors like your credit score and income, secured loans are backed by something of value, like your home or your car. Unsecured loans aren’t backed by collateral and are usually issued based on things like your credit score and income.

When you apply for a secured loan, you back it up with something valuable to you as collateral, like a home or a car. A home equity loan, for example, is usually secured by your home.

Unsecured personal loans, don’t ask you to place anything up for collateral, because they’re based on your creditworthiness. Factors like your credit score, income, and other information on your credit report can help companies figure out if a loan is right for you. This type of loan typically has a higher interest rate than a secured loan but could be an option for anyone who hasn’t built a lot of equity in their home, car, or investments.

Your creditworthiness includes a bunch of different things like your credit score, your credit report, your debt-to-income ratio, and other factors.

For secured loans like home equity loans, you’ll likely need to get an appraisal to find out the equity on your home—which could add on weeks to the process. If you have invested a lot into your home, or you have a lot of investments, you could have a better shot at getting a secured home equity loan, but it can take a while. Personal loans could be a quicker option if you need money quickly.

What’s the deal with credit inquiries?

Soft credit inquiries don’t impact your credit score. Hard credit inquiries could impact your score for up to 2 years. What’s the difference?

There are two types of credit inquiries, but only one can impact your credit score. Soft credit inquiries, also known as soft pulls, can be generated during background checks, when applying for jobs, or checking your rates for credit cards or personal loans, and they don’t impact your credit score.

Hard Credit Inquiries & Your Credit Score

Hard credit inquiries, also known as ‘hard pulls,’ are usually generated when you’re applying for new credit, such as mortgages, loans, and new credit cards. While many companies allow you to check your credit score for free, and at no impact to your credit score, always read the disclosures to know when applying for credit could generate one of these hard credit inquiries.

When you apply for new credit, like a loan or a credit card, companies will likely generate a hard credit inquiry. A hard credit inquiry could impact your credit for up to 2 years. A single hard credit inquiry will not likely drop your credit score by more than a few points. It’s important to monitor hard credit inquiries on your credit report.