How Signature Loans Can Save Your Credit Score – Part 2

Usually, people get an unsecured loan for a one time medical fee or a vacation. Unsecured loans are usually up to $10,000 and it's still a good amount in case you need such money. When your credit is good, shopping around for the best interest rates for an unsecured loan is advisable. Frequently, the best rates for an unsecured loan are offered through credit unions. If one has an existing account with the credit union, obtaining an unsecured loan should not be problematic.

Banks and credit card companies assess the creditworthiness of the borrower before handing over cash without collateral. Those who have lower credit scores tend to have less luck obtaining an unsecured loan, and if they can get one, they may be assessed high interest rates, since the lender is taking more of a risk.

There are some lenders that specialize in lending to consumers with less than ideal credit.
These types of signature loans usually come with higher interest rates than those offered to applicants with better credit. Another alternative for signature loan seekers with a low credit score is to have someone with better credit co-sign the loan. Having a more credible applicant sign the loan along with you, gives the bank additional guarantee that the loan will be repaid. A co-signer can also help you get a lower interest rate for your loan.

Defaulting on a signature loan can be detrimental to your credit, making it hard for you to get additional loans in the future. Since there is no collateral backing the loan, you are obligated to pay it, even if you run into financial trouble. If, for some reason, you are no longer able to make your payments as agreed, you should alert your lender as soon as possible. The lender may have a hardship program that can help until you are once again able to make payments.

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