Personal Loans and How to Get One

Personal Loans and How to Get One
  • Opening Intro -

    Borrowing money isn’t difficult to do. It just so happens that the easiest ways for going into debt, such as a taking on a credit card cash advance or a payday loan, also come with the worst financing terms.

    Rely on either form of debt and you’ll be caught in a cycle of borrowing — and impoverished for it.


A personal loan typically comes with much better terms. If the loan is secured — backed by collateral — you’ll obtain the best terms. If it is unsecured — no collateral offered — you’ll pay more. Here’s what you can do to obtain a personal loan at favorable terms.

Review Your Credit History

Lenders want to know if you’ll pay back your loan. That means they’ll inspect your credit history to learn what pattern of borrowing and repayments are apparent. This information is provided to lenders by three credit reporting bureaus: TransUnion, Equifax and Experian.

Consumers should obtain copies of their credit reports before applying for a personal loan. By law, all three companies must furnish one copy annually of your reports on demand. The website is where you must go to obtain your free copies. Go anywhere else and you may be charged for this service.

Review all three reports to determine that the information about you is correct and current. If you find mistakes or outdated information, notify the respective credit reporting bureau to have those problems corrected. Once the information has been updated or removed, then and only then should you apply for credit.

Know Your Credit Score

Your personal credit reports are important. but what creditors are interested in most is your credit score. That three-digit score is derived from your credit history, what looks at the types of credit you have, your repayments, credit age, and other factors.

The higher your score, the better for you. is one source for obtaining that score. Typically, you will get the lowest rate and most favorable lending terms if your score is excellent, usually 700 to 740 and above. A lower score won’t necessarily disqualify you from receiving a loan. However, your interest rate will come in higher.

Show Your Collateral

We touched upon collateral earlier, but it is worth emphasizing again. For without collateral, you may find it difficult to obtain a loan. Lenders want to see that you have “skin in the game” or your personal investment, which is what collateral demonstrates.

There are a number of personal assets that might qualify as collateral. A car, motorcycle, ATV, boat or camper you own outright just may do. You can also include jewelry, artwork, a coin collection or other items of value. Your banker will make the determination for what will be accepted. Keep in mind that if you default on a loan the collateral can be sold to pay for what you owe.

Loan Considerations

Lenders want to give money out, understanding that there is some risk involved. Your personal character matters as does your ability to repay what you borrowed. Consider how much you need to borrow and be prepared to show proof (pay stubs, bank statements, tax returns) that you are able to repay what you borrowed.

See AlsoLoan Terminologies and What They Mean


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Categories: Loans

About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Matt's Musings", his personal blog. Matt covers campus, consumer, business and financial topics on various websites and blogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".