Ok…let’s take the suspense out of the way (you need money, that’s suspense enough!). Getting the money could be easier (and safer) than you think.
We’ve all been there, or at least I have. You think you’re ok, then you’re hit with an unexpected (or larger than expected) expense and you have to find some extra money. If you have good credit, you have more possibilities. If your credit is s struggle, you might feel hopeless. Fear not – we all have options!
There are several basic types of loans. Depending on your credit score and timeline, some options will be more attractive. Unfortunately I have gotten into a financial pinch once or twice, so I have done my homework and found some ways to get the money quickly and safely.
Secured vs. Unsecured Unsecured loans are based on your ability to repay the loan and your financial stability, and the bank doesn’t require any material items be attached. Secured loans require collateral to ensure that you will repay the loan – a car payment uses the automobile as collateral, so if you don’t repay the loan, the bank will repossess your car.
Line of Credit Lines of credit are different than a conventional loan because they will allow you to tap into it as you have a need instead of giving you a lump sum up front. Your choice will depend on your plans and need, as well as your ability to manage cash flow and repay debt.
Open-Ended versus Close-Ended
Open-ended loans are also called revolving credit. The borrower is able to make payments and take out additional money within the terms of the agreement. Close-ended are for a specific amount and terms set at the beginning of the term, and they don’t change.
Conventional loans are determined at the onset and specific terms are set for repayment. Basically you borrow a specific amount and repay a fixed amount over a period of time.
Payday loans are small, short-term loans, secured by the borrower’s next paycheck. They are typically used to cover emergency financial situations aren’t advised otherwise. They carry significant risk for the lender, therefore carry higher rates and penalties. Be very careful with Payday Loans. They can turn into a nightmare faster than my family at the holidays!
How can you get the loan you need? There are a few factors you need to consider when deciding which loan is best, and steps to take to secure it quickly.
- Credit score
- Repayment period
- Financial need / Amount of expense
When taking all of this into consideration, you will make the best decision to ensure you maximize your loan potential while minimizing the overall cost.
Day 1 – Get Your Credit Score
If you don’t know what your credit score is, you should get a report. CreditKarma.com is a free online resource and valuable tool. I subscribe to it, and I get email alerts if the status of my credit changes or anyone makes an inquiry. And while it’s always good to check on it yourself, I like knowing that they will tell me if anything comes up. Did I mention it’s FREE?!
The higher your credit score, the more money you will potentially be able to borrow and at the lowest rate. If your score is less than perfect (over 650 is preferable), don’t worry. There are ways you can fix it and regain control of your finances.
- Get a credit card if you don’t have one. Credit scores are based on your loan repayment history. Get a card. Make some charges. And pay the bill on time.
- Add an installment loan, like a car payment. Again, on-time payment is essential. Once I paid off my car, my credit score jumped up 20 points!
- Pay down your existing cards. High balances on revolving credit are a red flag to creditors that you are not able to afford your spending. Pay down high balances. Try not to let your balance be more than 30% of your overall credit limit.
- Check your limits and make sure you are being offered all of the credit you’re due. Having higher limits doesn’t mean you have to spend more. It shows that you are a good risk.
- Use your old cards with longer credit histories instead of just relying on new cards. History matters and showing a long-term relationship with a creditor is a good thing.
- When reviewing your credit report, dispute any old negatives and make sure you correct any significant errors. Take the time to make sure your report is right.
Want a surefire way to get out of debt and have great credit? Pay your bills! Do it now! Fixing your credit can take some time. But if you’re already in good financial shape, your next steps to getting the loan you need are relatively easy.
Also, did you know that your insurance rates are tied to your credit score? I found this out the hard way. After some frivolous (but so much fun at the time) spending during my college days, my credit score tanked and my car insurance rates doubled. That’s a lesson I wish I wouldn’t have needed, but I pulled up my big girl panties and made some changes and got my credit in check.
Day 2 – Join a Credit Union
Now that you know your credit score, you have negotiating power with the lender. I would suggest getting your loan through a Credit Union. They are similar to a bank, but instead of being a customer you’re a member. Credit Unions answer to the members. Banks answer to profitability.
Not a member of a Credit Union? Signing up is easy. And since you have already checked your credit score and corrected any errors, you should have no problem opening an account.
- Credit Unions base membership on a commonality – such as where you live or work. Find the CU that you are eligible to join.
- Ask for an application and get started. You will need your identification and a small initial deposit. Mine was only $5 to join … really.
- Start using your account.
Once you sign up you are eligible to utilize all of the member services. One of my favorites is the no-charge ATM. I can use any Credit Union (not just my own) ATM and there is no service charge. ATM fees can add up in a hurry, so this is awesome!
Credit Unions are competitive and offer great rates on auto (mine was 2.99%), student, home equity, and personal loans. They typically offer online bill pay options as well, so once you get the loan you can set up repayments on auto-pilot. If you haven’t started paying your bills online, try it out. It will change your life!
The Visa card I have through my CU only charges 9.5% interest. The only condition for the fantastic rate is that I pay online. PLUS I get 1% cash back every year. It’s automatically deposited onto my card every January – yay! Pretty appealing and the only requirement for membership is that I live or work in a particular county.
You know your credit score. You’ve enrolled in a Credit Union. You’re well on your way to getting that loan. Can you really have the extra $10,000 that you need tomorrow? Yes!
Day 3 – Apply for a Personal Loan
Credit Unions offer a variety of loan programs, so do your homework and figure out which one is best for you and your needs. But if you need extra money for an unexpected expense, home improvement project, or maybe just an escape to someplace warm (I live in the Pacific Northwest) a personal loan is a great way to go.
They are typically non-collateralized (no security or equity needed), so they are great for someone who doesn’t want to tie up, or doesn’t have, the equity in their home. I bought my house a little over a year ago, and since values haven’t increased I can’t get a Home Equity Line of Credit. I think a lot of people are in the same position.
Personal loans have a defined repayment period, and it is often up to 4 years with a minimum payment required. However, there is no pre-payment penalty so you can pay it off as quickly as you want or are able to.
Interest rates on Personal Loans at my CU start at 10.99%, so it makes a lot more sense than using your credit card for the expense.
More often than not, the Credit Union will be able to approve your Personal Loan application the same day, so you will be able to access the funds immediately.
Don’t believe me? I did it, and so can you. I wanted to consolidate debt from higher-rate credit cards, and I went to my Credit Union for a loan. Before I walked out the door the money was in my checking account. Since I was already a member and they had access to my credit score, I got $10,000 in under an hour.
Don’t Risk Your Money
I know there may be quicker ways to get $10,000 … but three days is pretty fast, and you could actually do it in less time (like me in under an hour).
In our economic times, people are turning to risky loans because they think they are the only alternative. While the fast money might seem attractive, the risks can outweigh the rewards in a hurry. According to a credit industry survey, Payday Advance Loans average 300% APR.
This is one step away from a Loan Shark (or my grandma)! Maybe they won’t break your legs if you don’t pay, but they might as well. 300% is insane! Especially when you consider you can get a Personal Loan from a Credit Union is the same amount of time for as low as 10%.
Advances on your credit card may seem attractive because of their convenience, but they are expensive. And it’s some of the highest risk money when you are using your credit card like an ATM. They usually offer an initial low “teaser” rate, but then quickly jump up from 1-7% higher than the interest rate on the credit card.
Convenience is a dark mistress and usually costs you dearly. And no one wants to borrow money from their family members (have I mentioned my family holidays?!). So take some time and get the right loan at the right rate. You can still have your money quickly, and it will save you in the long run. And paying less for more always sounds good!
Easy as 1-2-3
I think we all have three days (or less) to get a $10,000 loan. Remember the simple steps:
- Get your credit score
- Join a Credit Union
- Apply for a Personal Loan
Securing a loan in under a week may seem beyond possibility, but it’s not. I’ve done it and so can you!