Frequently Asked Questions(FAQ)

How many points does a personal loan drop your credit score?

A hard credit check can cause a decrease in your credit score of up to 10 points. But perhaps more importantly than that, missing your minimum monthly payment could cause your score to plummet by up to 80 points. 

Is it better to get a loan or use a credit card?

The answer to this is really, it depends. A credit card might be your best option if you just need a small amount for everyday purchases. But, if you need funds for a larger project or want to pay off a high-interest credit card, then a personal loan or debt consolidation loan might be the better choice.

Do credit cards or loans build credit faster?

Both credit cards and loans help you build your credit if you make your payments on time every month. But, it is important to remember that your credit utilization is a big consideration in your credit score - 30%. However, using a loan to pay off credit card debt, especially high-interest cards, looks good for your credit utilization ratio, which means a credit score boost.

What Are the Risks of Taking Out a Personal Loan?

Any time you take on new credit, you are subject to risks. When it comes to a personal loan, your greatest risks are in making your monthly payments on time and that you can pay the minimum monthly due without negatively impacting your other financial responsibilities. As with any loan, be mindful, read the fine print, and don’t take on more debt than you can handle. 

How Do I Find the Right Personal Loan?

Consider these things when selecting the right personal loan for you. Aside from determining whether or not you can take on the responsibility of the loan, be sure to look for the loan features (term, loan minimums and maximums, etc.), interest rate, any fees you’ll be charged at the time of origination or for early payoff, qualification leniency, the application process, and customer support.

About the Authors

Ann Bloomquist

Written by: Ann Schreiber

Seasoned Copywriter & Content Marketer

Ann have been a marketer and a content writer for over 20 years. She have worked for financial institutions such as FICO, Experian, and BlueChip Financial as a director of content and brand marketing.

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