What Is a Good Credit Loan?
A good credit loan is a specialty type of loan for borrowers who have what is considered a good credit score. It’s typically offered in the form of a personal loan that doesn’t require any collateral. Instead, it’s based on the borrower’s credit profile. Rates, terms, and loan amounts vary by lender.
What Are The Good Credit Loan Rates?
Rates for good credit loans vary between lenders, loan types, and loan amounts. However, a typical APR for a personal loan with good credit is 8.99%+, for excellent credit the rate may be as low as 5.99%, and fair credit the rate increases to over 12%. If the lender offers loans for borrowers with bad credit, expect to have a rate over 15% and sometimes as high as 35%.
How Does Good Credit Affect Your Personal Loan
Good credit positively affects your personal loan in a number of ways. You will be offered low interest rates which will save you money over the life of the loan. Additionally, you may pay less in lender fees and be offered loan products that are only for well-qualified borrowers. You may also get to choose from different repayment terms and take advantage of lender specials and discounts such as one month interest free or not making your first payment for two months etc.
How to Get a Loan with Good Credit
Every lender has their own application and loan process, but typically you will complete the following steps to get one of the best personal loans with good credit:
- Know your credit score: Check your credit score so you don’t waste time applying for loans you won’t qualify for. There are several free and subscription based sites where you can check your score easily online in just a few minutes.
- Consider use and amount: What do you want the loan for? And how much will you need? Make sure that the lender doesn’t have loan usage restrictions and consider if the amount you need fits within their loan range.
- Compare lenders: Look at the rates, terms, fees, and qualifications and choose the one that best fits you
- Apply: Visit the lender’s site and fill out the application and submit all required documents
- Decision time: If you receive an approval, you will be given the next steps. You may be required to submit more paperwork such as bank statements, pay stubs, or tax documents
- Get funded: The lender will let you know when you will get funded and if it will be in the form of a wire or direct deposit to your bank account or a check, etc.
How to Improve Your Credit Score
There are so many tips and tricks to improve your credit score, but the best option is really just to be on top of your finances and not spend more than you can afford. Below are some specific ways to improve your credit score:
- Pay off your credit cards: In full by the due date
- Spend less: Try to spend less than 25% of your credit card limit. For example, if your limit is $1,000, don’t spend more than $250 on that card if you can help it
- Make on time payments: Pay on time consistently. If your payment is more than 30 days late the creditor can report it to the credit bureau and it negatively affects your credit score.
- File disputes: Dispute errors on your credit report
- Report: Make sure creditors such as rent and utilities are being reported to the credit bureaus so it counts positively when you pay on time
- Higher credit limit: Ask for a higher limit but keep your balance low so your available credit is plentiful and your credit utilization rate is low
- Authorized User: Ask someone close to you to be an authorized user on one of their accounts. This person should have good or excellent credit and make timely payments which will positively impact your credit score
- Pay off a large debt: This will show the credit bureau two things. One: you are responsible and can handle large debt so you will be more likely to be approved for a larger loan in the future. And two, that you pay your bills on time or early.
Other loan options for good credit
Besides personal loans for good credit, there are other options to consider. Having good credit already gives you better options than those without good credit. Some alternatives to personal loans include:
- HELOC: This is a home equity line of credit and is a revolving line that you can draw funds from during a draw period. You only pay back what you use, but you will need to own real estate to qualify for this.
- Traditional bank or credit union loan: Get a bank loan from the financial institution you have a relationship with. They often offer low rates and good terms for their customers. You may also be able to borrow against your own money you have in one of their accounts.
- Family or friends: Borrow money from family or friends, but treat it like a loan, with a contract and a payback date. You don’t want to ruin a relationship over a loan.
- Home equity loan: Essentially a second mortgage, you can borrow against the equity in your home to free up some cash. However, you will need to have enough equity in your home and meet the lender’s other criteria
- Business loan: If you own a business, you could take out a business loan to free up some cash. Remember to read the loan criteria and make sure that it can be used for whatever you intend to use it for.
- Cash out refinance: If you already own a home, you can take out a loan to pay off a previous loan and also get cash. You will be responsible for paying off this new larger loan.
- Credit card advance: Some credit card companies will give you an advance where you can withdraw the money same as cash, but watch out for fees and potentially high interest rates
- Borrow from stocks: If you have an investment portfolio, you could take the money from there and then put it back in affordable increments. You will need to wait a few days to sell shares and then have the money available
The best personal loans for good credit are offered by lenders with competitive rates, easy applications, quick funding times, and transparent fees. These loans can be used to pay off debt, fund emergencies, and for a host of other reasons. You can typically find the best loans through an online lender, a bank, or a credit union. Although most of these loans don’t require collateral, they do take your credit into high consideration, and the better your credit, the more competitive the terms will be, and the lower your interest rate will be.