Personal loans can be a good source of money if you need urgent cash for a specific purpose. Statistics show that more Canadians are turning to personal loan Manitoba to improve their financial life. For instance, in the fourth quarter of 2017, at least nine million Canadians had a personal loan. People take personal loans for various reasons such as to consolidate their debts, manage major expenses, or pay off bills that could attract penalties and high interests.
So, why are personal loans appealing to many? The primary reason why most people prefer to go for personal loans is that they offer low-interest rates for borrowers with impressive credit scores. Here are the top four things that you should know if you are considering to apply for a personal loan.
Understand Your Credit Score
Whether you are approved for a personal loan Manitoba and at what interest rate will largely depend on your credit score. You will have high chances of being approved if you have an average to above-average credit score. It is always a good idea to go into the loan application process with a clear picture of your credit score. Just request your credit report from any of the credit reporting companies and go through it carefully to see if it is accurate and up-to-date.
Know How Personal Loans Work
Personal loans are a types of installment loan. This means that you are allowed to borrow a fixed amount of money and repay it with interest in fixed monthly installments over the life of the loan. The loan period typically ranges from 12 to 84 months. Your account will automatically be closed once you repay your loan in full. It is essential to think about why you need the money before you start the application process.
Understand Your Credit Utilization Ratio
One of the most critical factors that will affect your credit score is your debt utilization ratio which is the ratio between your outstanding loan amount and total loan limit. For instance, if you have $20,000 in available debt and you have only borrowed $5,000 of that credit, then your credit utilization ratio will be 25 percent. Your credit score tends to rise when your utilization ratio is maintained below 10 percent. Anything above 10 percent will affect your credit score negatively which ruins your chances of qualifying for a personal loan.
Know Where You Can Borrow the Money
Once you understand the things mentioned above, you now need to know who to approach for lending. The good news is that there will always be a lot of lenders who are willing to lend you money if you qualify. Traditional banks and credit unions also offer personal loans to borrowers with good credit scores. Choose a reputable lender or bank that offers great service and one that will be willing to listen to you and cater to your financial needs at all times.