5 Loan Options for Those With Good Credit
One of the nice things about having good credit is the ability to secure funds for a variety of reasons and through a variety of channels. The hard part is figuring out the best types of loans that will help you maintain your good credit rating while still getting you the money you need to accomplish your goals. Having excellent credit will allow you to have your pick of cheaper loans with potentially higher limits. If you're in any need of financing, here are a few suggestions where you can seek out credit lines:
So you've worked hard to make sure your credit remains clean. Even in this difficult credit climate, it should still be relatively easy for you to use credit cards. However, credit cards may not be the best option for financing because revolving credit is costly and is easily abused. When utilizing a credit card to make purchases or to cover an emergency, it is always best to plan to pay your bills in full by the end of the month to avoid having to pay expensive interest charges. Refrain from making any unnecessary purchases on credit cards even if you're faced with cards that sport 0% intro APR rates. The temptation to only pay the minimum payments on the debt is high, and there's that possibility to pile on the debt over time. Use your plastic wisely. If you want to place a limit on your spending or want to avoid taking out debt but want to enjoy the convenience of using plastic, then why not turn to prepaid debit cards instead?
Peer to Peer Loans
A relatively new way to borrow is by taking out a peer to peer loan. It's a form of personal loan that you can apply for through a peer to peer lending network like Lending Club or Prosper. You can simply sign up to become a member of the network and find out if you'll be accepted as a borrower. The service requires that you have a fairly strong credit history and a credit score of at least 680. Lenders who are also members of the network will have the chance to review your loan specifics to determine if they are willing to fund your loan. Here's more on how to apply for such a loan.
Cash Out Refinancing
If you have existing debt, then here's an option to consider. If you have equity in your home, one of the best ways to get yourself out of debt is to refinance your home and take cash out. The interest rates on a primary mortgage are far lower than on any other type of loan product available on the market today. Plus, there are no restrictions on how you use the money. You can pay off other debt, remodel your home or whatever else tickles your fancy, but since you're taking equity out of your home, make sure that the debt you're taking is worth the loss in equity and the additional interest you'll be paying.
Borrowers with good credit can secure a personal loan or a signature loan from their banking institution. This is an installment loan, just like a car loan, except that the funds are dispersed to you instead of the car lot. If you meet the credit thresholds for your lender, your loan will be secured by only your signature and your vow to pay them back, which is nice if unforeseen circumstances make paying back the loan difficult.
Home Equity Line of Credit (HELOC)
If refinancing is out of the question for you, or just the mere thought of starting over on a 30-year mortgage turns your stomach, then you may want to consider taking out a home equity line of credit, or HELOC. This loan product is commonly known as a second mortgage because it uses the value of your home to determine what your credit line will be and places a lien against your home, just like your primary mortgage, to protect the lender against default. As with a refinance, a HELOC offers the homeowner a pool of funds at a great interest rate and does not require the money to be used for a specific purpose.
However, you should be very careful about taking out this type of loan. Having a HELOC adds another payment to your budget every month and may put your home at risk if you have trouble keeping up with payments. Remember that your house is used as collateral, so be careful when going down this route. Also, the funds are only available for a specified amount of time, known as the draw period. After that, you'll have to start paying back the loan and may no longer have access to your pool of funds.
These are just a sampling of loans you can obtain when you have good credit. The bottom line here is that if your credit record is in great shape, then you have a lot of options for financing. Whichever method you choose, make sure that you approach the process with care. Don't bite off more than you can chew: Only borrow what you can comfortably pay down over time.