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Top Benefits and Reasons to Get a Personal Loan

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LoanPhoto by Alexander Mils

Originally Posted On: https://www.quickloansamerica.com/2020/02/27/top-benefits-reasons-to-get-a-personal-loan/

 

Regardless of what you may have heard from others, debt is not an evil thing. When used properly, it can be a great tool for either improving or making your personal finances easier to manage.

People who are financially responsible use credit cards for everyday expenses like groceries and gas. They also may take out secured auto loans and mortgage loans in order to purchase cars and homes they may never be able to pay for in full with cash.

It has become increasingly more popular for people to turn to online lenders for unsecured personal loans. When compared to other alternatives like traditional bank loans, credit cards, and payday loans, unsecured personal loans online have several key advantages.

Let’s dive in and look at some of the benefits of unsecured personal loans and some of the reasons you might want to think about using them.

5 Key Benefits of Getting a Personal Loan Online
Why should you choose to take out a personal loan online instead of other potential choices? Consider the following benefits, but keep in mind that the ideal personal finance product for any situation can depend on many different factors. This could include borrower credit, income, assets, employment, preferred terms, and the purpose of a particular loan. In some cases, your credit history may not matter when considering using a bad credit loan company.

1. Potential for a Higher Loan Amount Than a Credit Card
While people with exceptionally good credit may be approved for $10,000+ with a premium credit card, most people will not qualify for these types of credit cards. People with “good” credit may qualify for around $2,500 to $10,000, while people with bad credit or lower credit scores may only qualify for $300 to $5,000 max.

That being said, borrowing limits for personal loans are usually higher than what you can get with a credit card. While borrowing limits may vary by each loan company, most lenders will max out around $10,000 to $15,000 while a few may go as high as $40,000. In either case, you will generally always be able to obtain a higher credit amount from a personal loan than a credit card.

Similar to personal loan companies, credit card issuers may use many factors when determining a spending limit for applicants. Most of these are taken from consumer credit reports:
– Debt to Income ratio
– Credit score
– Payment history with other loan or credit card accounts
– Employment history
– Income
– Derogatory items like bankruptcies or late payments
– Credit inquiries (how often and how many)

2. Easier Approval For Online Personal Loans
Especially for people with poor credit, it may be difficult or impossible to get approved for a credit card. This doesn’t mean you can’t have access to unsecured credit though. There are many online personal loan companies who will approve you for an unsecured loan, even if you can’t seem to get approved anywhere else.

If your credit score is low, then you may consider getting a bad credit loans through an online lender. Regardless of your credit history, you can get approved for a personal loan online with no credit check!

3. No Requirement For Collateral
Unsecured personal loans don’t require you to secure any assets to the loan as collateral. While the consequences of not making your payments on an unsecured loan will be very negative, you don’t have to worry about losing your house, car, or some other asset that is important to you.

4. One Personal Loan Is Easier To Manage Than Multiple Credit Cards
Getting a single loan, with a fixed interest rate and a defined loan amount is much easier to manage than having multiple credit cards, all of which may have different credit limits, interest rates, due dates, policies, etc. So if you need to borrow $10,000, wouldn’t it be much simpler to apply for a single personal loan of $10,000 as opposed to getting four credit cards with $2,500 credit limits each?

5. Well Defined Repayment Schedule
When it comes to personal loans, there’s never a question about what the fixed interest rate, repayments terms, and monthly payment amount is. When you’re approved, you’ll know exactly how much you’ll need to repay each month, how many months you’ll need to make those payments, and what your total interest cost is over the entire loan period.

Credit cards are not nearly as predictable. The only thing that typically doesn’t change is your monthly payment due date. The required minimum monthly payment amount depends on what your balance owed is, and your interest rate could easily change since it will almost always be linked to a benchmark like the prime rate.

Top 6 Reasons to Get a Personal Loan

1. Refinance Existing Debts or Bills
Often times, personal loans are used as debt consolidation loans that are taken out specifically for the purpose of consolidating credit cards and other loans into a single personal loan, often times at a lower interest rate. A debt consolidation loan is easier to manage, more predictable, and may have lower monthly payments.

It may be that you’ve fallen behind on some bills and are needing an easy way to get everything caught up. It’s so easy to get short term loans online, you could easily bring everything current and have one simple monthly payment.

2. To Finance a Major Purchase
An unsecured personal loan may be more suitable for you to use for some major purposes than a credit card. Often times your interest rate will be better on a personal loan, especially if you won’t be able to pay off the amount before a potential promotional period on a credit card expires. The vendor you are purchasing from may not accept credit cards. A personal loan may also provide a higher approval amount if the purchase price is greater than your credit card limit and you don’t want to open multiple credit card accounts.

Some examples of these major purchases could be:
– Purchase of an automobile
– Home improvement (especially if you don’t have enough equity in your home to qualify for a home improvement loan)
– Vacation

3. To Pay For Unexpected Major Expenses
Sometimes you may encounter a large expense that you aren’t ready for, but it is required and must be taken care of immediately. Some examples are:
– Major medical bills
– Vehicle repairs (either not covered by insurance, or you have a high deductible)
– Emergency home repairs like a hot water heater or your heating or air conditioning unit

Some online personal loan companies can fund your loan the same day or at least by the following business day. This is much faster than getting funds from a regular bank.

4. To Finance a Wedding
Generally, many different expenses will come up during the months of planning and preparing for a wedding. In some cases, reservations for some catering and venues will have to be made at least a year ahead of time. Engagement rings will very likely come well in advance of the wedding too.

It may be a good idea to go ahead and take out a personal loan for all wedding related purchases, and then setting the proceeds aside in a separate checking account to be used exclusively for all wedding expenses.

5. To Adopt A Child
Kids, in general, are expensive, but adoption can require many upfront expenses.

Some of these expenses may include legal fees, travel and lodging if the child is in other city, medical expenses, application/administration fees, and possibly other expenses as well.

6. To Expand a Business
If you need money to help you expand your business, you could apply for a personal loan as long as the loan amount will be large enough to cover your business expansion costs. However, if you need a larger amount, you may want to consider getting a business loan online. The requirements are usually pretty simple, as compared to a traditional commercial loan at a bank. You’ll generally need to have been in business for at least 6 months, can provide bank statements, and possibly some other documentation that should be pretty easy to provide.

In Conclusion
While the above benefits and reasons are some great examples for taking on new debt through a personal loan online, obviously they’re not the only reasons to get a new loan. It could be anything!

Also, for whatever its worth, personal loan companies are just as anxious to approve your loan as you are to receive your cash! It can be a win-win situation for all involved. The important thing is to understand what you are needing and how a personal loan may be the best option for you to meet your financial needs.

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Fall River Man Charged With Stealing Unemployment Benefits

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BOSTON – Six Massachusetts residents have been charged in federal court with using stolen identities to obtain official IDs and governments benefits, including a Fall River man.

Antonio De Carvalho Vicente, 59, a Brazilian national illegally residing in Fall River, allegedly submitted an application for Pandemic Unemployment Assistance benefits using another person’s name and Social Security number, according to a media release from the office of U.S. Attorney Andrew E. Lelling.

De Carvalho Vicente allegedly received weekly payments of $600 under the PUA program, although the Massachusetts Department of Unemployment Assistance later ceased payments after flagging a suspected identity issue, Lelling’s office said. The release did not say how much money the man allegedly collected.

Last week in Boston, De Carvalho Vicente was charged with theft of government funds. The charge provides for up to 10 years in prison, three years of supervised release, and a fine of $250,000.

Five other defendants, including people from Lawrence, Roxbury, and Roslindale, allegedly used Social Security numbers and other identifiers to obtain, for example, Massachusetts driver’s licenses, Mass Health benefits, and unemployment assistance under the Coronavirus Aid, Relief, and Economic Security Act, Lelling’s office said.

“Identity fraud takes a tremendous toll on its victims,” Lelling said in a statement. “Individuals whose identities have been misused can face difficulties obtaining health care benefits, Social Security benefits or unemployment benefits, and are often left dealing with collateral consequences such as tax liability, bad credit and outstanding arrest warrants in their names. We will continue to hold accountable those engaged in identity fraud.”

Michael Shea, Acting Special Agent in Charge of Homeland Security Investigations in Boston, issued his own statement:

“These arrests mark an important landmark in the fight to ensure that benefits owed to American citizens go to whom they belong and not to those illegally present in our country,” said Shea.  “This is an important enforcement metric reached in the fight against benefit theft crimes, which are especially egregious during today’s these times of serious economic and public health concerns.”

Shea extolled the “tireless, dedicated team work of those partners who make up the Document and Benefit Fraud Task Force” and praised Lelling, the U.S. Attorney for Massachusetts, “whose unprecedented commitment to prosecuting these crimes has never wavered.”

Phillip M. Coyne, Special Agent in Charge at the Office of the Inspector General of the Department of Health and Human Services regional office in Boston, took the opportunity to chime in:

“The Medicaid program is a partnership between the federal government and the states to provide healthcare to some of the most vulnerable members of society,” said Coyne. “Medical identity theft jeopardizes the safety of its victims while disregarding the taxpayers who ultimately bear the cost. We will continue to root out imposters whose actions threaten the integrity of our healthcare system.”

Since July 2018, 50 people have been charged in connection with document, identity and benefit fraud through investigations by Homeland Security’s document and benefit fraud task force, a “specialized investigative group comprising personnel from various state, local and federal agencies with expertise in detecting, deterring and disrupting organizations and individuals involved in various types of document, identity and benefit fraud schemes.”

The task force investigates people who allegedly obtained stolen identities of U.S. citizens living in Puerto Rico to fraudulently obtain documents and public benefits, Lelling’s office said.

Lelling acknowledged a host of partners in the investigations, including police departments in Fall River and Dartmouth.



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Self-Employment, Freelancing, and Auto Loans

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With unemployment hitting record highs this year, we’ve also seen an increase in people becoming self-employed by starting to freelance or picking up a side hustle in an attempt to make extra cash. What does this mean in terms of your ability to take on a car loan, though?

Proving Your Income While Self-Employed or Freelancing

Self-Employment, Freelancing, and Auto LoansOne of the cornerstones of getting approved for an auto loan is proving you have enough income to pay for the vehicle. With a W-2 income (when you work for someone else), this simply means having a recent check stub that proves a monthly income that meets the lender’s minimum requirement, and shows your year-to-date income.

For people who are self-employed or freelancers, this means you have 1099 income (when you work for yourself or you’re a contractor). Some lenders may not accept borrowers that are self-employed, and whether or not they do can depend on your credit score.

Borrowers who are self-employed may need to provide copies of their tax returns to prove their income. However, if you have good credit, a traditional car lender may not ask for these. They may only ask for bank statements or deposit slips as proof of income.

However, expect to need more if your credit is poor.

Proof of Self-Employment Income and Subprime Lenders

For borrowers who are applying with a subprime auto lender for their next car loan due to a lower credit score, proof of income is a big factor. Subprime lenders look for stability in their borrowers outside of their credit score, and this means they typically verify work history and income to determine your ability to take on an auto loan.

If you’re self-employed or a freelancer with bad credit, then expect a subprime lender to ask for two or three years of your tax returns for proof that you can meet the income requirements. Your tax returns also prove that your income is taxed and reported.

Many people wonder if you can use bank statements to prove your income with a subprime lender. Unfortunately, bank statements don’t show that your income is reported, just that it’s deposited in your account, so subprime lenders almost always don’t accept them as proof of income.

Your tax returns can also prove your work history, since it can show a consistent source of income. Many subprime lenders look at your work history going back three years, and they usually require that you’ve been at your current job for at least six months to one year.

While subprime lenders have some stringent requirements for their car loans, it’s all in an effort to make sure that you have the ability, stability, and willingness to handle the loan. Their auto loans are also reported to the credit bureaus, which means there’s a chance for credit repair with timely payments.

If you can’t prove your income or work history with tax returns, then you may have to look into other car lending options.

Self-Employment and BHPH Dealerships

If your credit score is low, you’re self-employed, and your tax returns don’t prove your income, then you’re likely to need a buy here pay here (BHPH) dealership to get into an auto loan.

BHPH dealers have double roles, since they’re also your lender. All the car shopping and financing is done at the same location, so it’s a one-stop-shop experience. The biggest plus to these dealerships is that they usually aren’t concerned with what’s on your credit reports, so a lower credit score wouldn’t come in between you and a vehicle.

These dealers often aren’t as concerned about where your income is coming from, as long as you have enough to prove you can pay for the car. Since BHPH dealerships don’t have to rely on a third-party lender to approve you for financing, they tend to have their own means of verifying income.

Some requirements of a BHPH dealer usually include a down payment and some form of proof of income. On average, BHPH dealerships tend to assign higher than average interest rates on their auto loans, so it’s something to be mindful of. BHPH dealers may not report your car loan to the credit bureaus, so ask about their reporting practices if you’re concerned about credit repair.

Ready to Find a Dealership?

Finding the right lender for your income situation can be a struggle, especially if you’re dealing with credit issues. However, locating the right lender doesn’t have to be a hassle, and we want to help.

Here at Auto Credit Express, we’ve produced a network of dealerships that spans across the country. We match bad credit borrowers to dealers that are signed up lenders that work with unique credit situations. Get started right now by completing our free auto loan request form, and we’ll look for a dealership in your area without any obligation.

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What Is a Line of Credit vs. Credit Card

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Borrowing money is par for the course when you run a small business – emergencies arise and opportunities pop up, and both require quick access to cash. For many small business owners, it’s a toss-up between taking out a line of credit or putting expenses on a credit card. Deciding which funding method makes sense for you depends on your credit score, funding needs and the type of business you’re running.

 

Editor’s note: Looking for the right loan for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

What is a line of credit?

A line of credit is a revolving loan that allows business owners to draw down money as they need it. The money can be used to address business expenses or to bankroll growth. There is no lump sum disbursement with a revolving line of credit, it works like a credit card. You only pay interest on the money you use.

How does a revolving line of credit work?

A revolving line of credit is a business loan that you can continually drawdown and repay. The credit limit on lines of credit typically range from $1,000 to $250,000, although some lenders will go even higher.

A small business line of credit is renewed annually, with interest accruing once you draw down money. Most have a variable interest rate, which means it changes with the prevailing interest rate in the market.

To obtain a line of credit, you and your business undergo a credit review in which your credit history is picked apart. That will determine the interest rate and credit line. In some cases, a personal guarantee is required to win approval for a revolving credit line.

 “Lines of credit are harder to get than a business credit card,” said Ted Rossman an industry analyst at CreditCards.com. “You have to be in business for at least three years and have at least $250,000 in annual revenue. Some online lenders lower the threshold.”

What are the types of lines of credit to consider?

There are two main types of business lines of credit: secured and unsecured.

  • Secured lines of credit require the business owner to offer collateral. If the debt goes unpaid the lender gets the piece of equipment or real estate. Secured lines of credit tend to have higher limits and lower interest rates because you have skin in the game. Secured lines of credit are required for funding of more than $100,000.
  • Unsecured lines of credit don’t require you to pledge collateral, but you may have to sign a personal guarantee. That means if your business doesn’t pay back the money, the bank or lender can come after your personal assets. Unsecured lines of credit tend to have lower limits and higher interest rates. Many unsecured credit lines have a credit limit from $10,000 to $100,000.

“A personal guarantee can be required if your business doesn’t have paperwork or you’re a sole proprietor,” said Michael Levin, a professor at Otterbein University. “They want proof you can pay the loan back.”

When should you choose a line of credit?

There are several reasons why a business owner would want to use a line of credit, including these four scenarios.

  1. Fund growth: Business owners in growth mode can benefit from a business line of credit. It can be used to purchase new equipment, launch a marketing campaign, or otherwise grow your enterprise. “If you are expanding your business or entering a new market a business line of credit makes sense,” said Levin.
  2. Fill cash-flow gaps: Many small businesses don’t get paid on the spot for their services. Sometimes it can take sixty to ninety days. That can negatively impact cash flow. A line of credit can be used to fill any gaps while you await payment.
  3. Peace of mind: Unexpected emergencies and expenses is part of running a business. If you aren’t prepared, it could spell your business’s demise. A line of credit is insurance against that, acting as a cushion when you need cash.
  4. Builds your business credit rating: If you maintain your line of credit, it will be reflected in your business credit score. The higher that is, the lower the cost of future borrowing.

How do I get a line of credit?

Business owners have options when applying for a line of credit. Banks and credit unions offer business lines of credit, as do credit card issuers and online lenders. It’s important to shop around since the interest rate will vary from one lender to the next. Levin said to start with your existing financial institution and take it from there. They already have a relationship with you and may offer deals if you have a business banking account.

Online lenders are another option. They tend to be more lenient than banks in approving borrowers, but the interest rate may be higher.

“A general rule of thumb: for banks, you have to be in business for three years and have $250,000 in annual revenue; for online players, it’s one year and $100,000,” said Rossman.

What is a business credit card?

A business credit card is also a revolving line of credit that can be used to make purchases. Credit cardholders pay annual interest and fees, otherwise known as the annual percentage rate (APR). Many business credit cards have rewards and loyalty programs that give you cash back and/or points on purchases.

How does a business credit card work?

Business credit cards act the same way that personal credit cards do. You use them for purchases online and in stores and are required to pay a monthly balance. If you don’t pay the entire amount, it carries over to the next pay period and interest is tacked on. Credit card debt can get expensive, particularly if the APR is high. Also, some credit card issuers charge an annual fee.

Business credit card issuers look at your personal and business credit scores when approving you for credit. If you have a high credit score, you’ll get a lower interest rate on your card than someone with a poor credit score. If you default on your credit card it will have a negative impact on your personal credit score and standing.

Business credit cards have a lot of perks if you use them responsibly. To get your business, credit card companies will lure you with generous rewards and bonuses. They know businesses tend to spend a lot of money each month and they will go to great lengths to win your business. Most offer 0% introductory APR, sign-up bonus, and generous cashback or point on purchases.

When should you choose a business credit card?

Business credit cards can be very useful for business owners, granted they are paying off the balance each month and avoid racking up credit card debt. Here’s a look at three of the big reasons why you may want to use a business credit card.

  1. Rewards you for purchases: A big perk of using a business credit card for purchases is the rewards. From cashback to free flights, business owners can rack up serious cash and rewards with a credit card.
  2. Prevents comingling of accounts: Having a business credit card helps you keep business and personal expenses separate. Whether you’re just starting out or have been in business for years, best practice is to have a separate business and personal checking account. This applies to credit cards too. Having a business credit card helps you keep your expenses separate and also makes it easier to track them.
  3. Builds your business credit score: Just like a line of credit a business credit card can help you establish or build your credit score. If you use the card responsibly, your rating with the credit rating bureaus will increase over time. That will make it easier and cheaper to borrow money the next time around. A lower monthly payment on future credit card debt is welcome news to business owners.

Line of credit vs credit card: which should you choose?

There are several differences between lines of credit and business credit cards. Which one makes sense for you depends on your credit standing, funding needs and business type. Consider the following four questions.

  • Which can you qualify for? Business credit lines are harder to get than business credit cards, requiring you to have an established operation. According to Rossman, the interest rate on both products are in similar ranges, although you may pay more with a credit card depending on your credit score. If you and/or your business don’t have stellar credit, you have a better chance of getting approved for a business credit card than credit line. [Read related article: How to Apply for a Business Credit Card if You Have Bad Credit]
  • How established is your business? If you are a sole proprietor or a new business owner who doesn’t yet have any financial documentation for your business, a credit card is the better choice. Typically, with a business line of credit, lenders require you to have one to three years in business and $100,000 to $250,000 in annual sales.
  • How do you plan to use it? If you need money to make a large one-time purchase or for small expenses like office supplies, a business credit card makes more sense. If it’s for large recurring expenses like inventory purchases, emergencies or to fund growth, a credit line is a better option.
  • Do you travel or make a lot of small purchases for your business? If you travel a lot for business or have a lot of small, regular purchases, a business credit card may be the better option because you can rack up a lot of miles and/or cashback rewards, granted you pay your balance each month.

“It depends on the type of business you have. If you do a lot of traveling as part of your business than a business credit card makes sense,” said Levin. “If you are trying to structurally increase your business, a business line of credit makes more sense.”

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