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The best way to get a personal loan in 2020

date August 31, 2020 time 4 min read 305 views

The best way to get a personal loan varies from person to person. Most lenders assess credit histories, meaning anyone with a poor credit score could end up with fewer options when they want a loan. Fortunately, this is changing as more personal loan options emerge. We’re going to take you through some of the best ways to get a personal loan today.

Before you look at your personal loan options, you need to answer one simple question: can I borrow money easily?

Personal loans often don’t involve collateral (tangible assets the borrower promises to give up if they fail to repay) — lenders mostly rely on credit scores to decide whether a borrower is reliable. The best way to get a personal loan is to work on your credit score.

There are various options available for getting a personal loan
There are various options available for getting a personal loan
(source: publicdomainpictures.net)

Credit scoring for personal loans

Every time you apply for, make a payment or fail to make a payment toward a loan (including credit cards), you build or damage your credit score.

Credit bureaus assign you a credit score from 300 to 850 — the average score is around 700. A higher score indicates a reliable borrower. Reliable borrowers get lower interest rates.

You can boost your credit score by:

  • Making payments on time
  • Only using a small percentage of the credit available
  • Having a long credit history 
  • Possessing a few different credit accounts
  • Applying for new credit accounts infrequently
  • Avoiding hard credit checks whenever possible

Unfortunately, this means that people who need loans the most — young people with a limited credit history and those with a poor financial history — face the most significant challenges. 

Lenders might not offer them a loan at all, and if they do, the interest rate could be extortionately high.

It’s important to understand how to get a personal loan online
It’s important to understand how to get a personal loan online (source: flickr.com)

Traditional personal loans options available to you

The oldest and best-known way to get a personal loan is through a traditional financial institution – usually a bank or mortgage lender.

Banks

Go to any bank’s personal loans page, and you’ll notice a vast range in interest rates. For instance, Marcus, by Goldman Sachs, offers borrowers between 6.99% to 23.99% APR. But if your credit score is anything short of excellent, you can expect an interest rate well into double digits.

Payday loans

There are also payday loan providers, which offer short-term loans to borrowers who need some extra cash to get by until payday comes around. These lenders are often exploitative, offering notoriously high interest rates. You should avoid them if at all possible.

Credit unions

Credit unions are the other major traditional personal loan option, and they loan money at lower rates with less stringent conditions. But not everyone can just join a credit union — to be a member you usually have to meet requirements, like living in a specific area or having a certain employer.
However, these traditional options are falling out of favor among the average borrower. Now there’s a new kid on the block: online lending platforms.

The best-known way to get a personal loan is through a bank, but that doesn’t mean it’s the best option
The best-known way to get a personal loan is through a bank, but that doesn’t mean it’s the best option (source: publicdomainpictures.net)

P2P lending, the future of personal loans?

With a potential recession looming, there’s a strong chance lenders will tighten their restrictions for loans and increase interest rates for borrowers who want personal loans.

Yet getting a personal loan with fair terms might not be as difficult as you think. 

The days when you had no option but to head to a pawn shop or loan shark when credit was tight are long gone.

To get around the problems with traditional lenders, people have increasingly turned to peer-to-peer (P2P) lenders.

While traditional lenders charge a premium in fees for working as an intermediary, P2P marketplaces use technology to connect individual borrowers and lenders.

What are the advantages of P2P loans?

If you have a less-than-perfect credit score and history, you’re more likely to receive a better loan offer and rate through P2P platforms than through a traditional lender. There are many platforms to shop around on too.

The downside of P2P

However, P2P isn’t all sunshine and rainbows. Even if P2P platforms don’t explicitly use credit scores, they often use credit assessment algorithms with similar functions. And they still favor borrowers with the best credit histories.
If that’s a hangup for you, you’re in luck. Today some platforms don’t require a credit score.

Get a personal loan at a low rate no matter your credit score with MyConstant

Your personal loan options don’t start and end with conventional P2P sites — some platforms harness technology to avoid reliance on credit scores.

To get a loan through MyConstant, you just need to put up 150% of their loan value in cryptocurrency, your financial history is irrelevant. While on loan, your collateral is held in smart contracts or a secure crypto wallet and returned automatically on repayment.

Constant personal loans are flexible and personalized –  you can choose a term for any period between one and six months for as low as 6% APR.

Finally, there are no middlemen or trading fees when using MyConstant’s loans. The result is greater security and lower rates for you.

New technology has brought even more ways to get a personal loan
New technology has brought even more ways to get a personal loan

Although the best way to get a personal loan varies between individuals, borrowers are in a better position now than any other point in history thanks to new technologies built in their favor. Come check them out.

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