If you live in Fresno, California, a personal loan may be your best option to receive extra capital quickly. Typically, personal loans tend to be valuable for individuals seeking an alternative to debt consolidation. However, personal loans have a wide range of benefits and uses. Today, we are going to share some insight on personal loans and the importance of understanding credit score and the role of interest rates.
The Roles of Credit Scores
Before you are quick to opening a personal loan in Fresno, it’s important that you take the time to review your credit score and report. These two financial concepts will play a critical role in the quality of your future personal loan. In light of this, we advise anyone interested in a personal loan in Fresno to request a free copy of their credit report from the credit bureau.
For credit scores, typically, most credit card companies will provide a free monthly report of an individual’s credit score. From here, you can gauge where you stand and where you can make improvements. For note sake, the state credit score average in California is 701 – how do you compare?
If your credit score is lower than the state average, what this means is that, when you are applying for a personal loan, you will be seen as a greater risk than other individuals above the average. As a result, you will be charged higher interest rates and offered lower total loan amounts. If you are seeking a personal loan with lower interest rates or a significant amount, before you apply, it’s important to improve your credit score to the best of your ability, even if it’s higher than the average.
Interest rates can be detrimental to your personal finances – and your credit score will directly impact how high or low your interest rate will be.
The Role of Interest Rates
When it comes to personal loans, interest rates are a critical component that can directly impact the quality and length of a loan. As a rule of thumb: the lower the credit score, the higher the interest rate. As a result, the higher the interest rate, the more money an individual will pay to pay off the loan. To show the impact of interest rates, look at our example:
Let’s say you took out a loan under the following:
- 5 Year Loan
- 10% Interest Rate (Incredibly Low)
- $10,000 Loan
If you were to make regularly monthly payments, it would roughly cost:
However, with the 10% interest rate, an individual will end up paying an additional:
So, in this example, a $10,000 loan actually costs $12,749.23. Can you imagine what your loan would look like with an even higher interest rate?
Be Cautious and Smart
In light of the statistics we have provided and the information on your credit report, it’s important that consumers and residents are knowledgeable about all things personal loans before applying for one. Only through improving your credit score and understanding the nature of these loans may it be considered a safe decision. Be sure to do extensive and comprehensive research to ensure that, whatever company you choose, places your best interests first.