When you need to get a personal loan, you might feel held back by your current level of credit. You will want to know if you need to get a credit check in order to get a personal loan.
What is a Personal Loan?
A personal loan is emergency funding that you can obtain through a bank, a private lender, online lenders, a credit union, etc., that you pay back in a predetermined set of fixed monthly payments. Typically, these payment terms will range between two to five years.
Many kinds of personal loans are unsecured, meaning they do not require you to provide your lender with any form of collateral. But there are also several payday loans that are not unsecured and do require you to offer your lender some kind of valuable asset (usually your house or car).
Do I Need a Credit Check to Get a Personal Loan?
It really depends on what kind of a loan you are trying to get. Many personal loan lenders (depending on what kind you are going for) will still do a credit check on you, even if they will not be using your credit score or history to decide whether or not they will grant you approval.
A credit check will not necessarily prevent you from getting a personal loan as long as you go to the right kind of lender. You might not get the interest rate if you don’t have great credit, but you may still be able to get a personal loan.
What Kinds of Personal Loans Are There?
If you have found yourself in a situation where you need to get a bit of extra funding, there are a wide plethora of various personal loan options for you to pick from, depending on what best suits your current financial needs and circumstances. A few of the most common of these kinds of personal loan options include (but are not limited to):
Unsecured loans do not require you to offer your lender any form of collateral before you are approved to take out the loan. These loans are usually for small amounts ($500 or less in most cases), but several, like payday loans, can be taken out in a hurry. Fast service is what makes this loan option great if you are facing a financial emergency and you need extra money as soon as possible. In most instances, you do not need to have a good credit score in order to qualify for an unsecured loan.
Secured loans are a type of loan where you are required to put up some kind of collateral before being approved. Borrowers could use their car (car title), house, or potentially some other valuable asset. This is done so that your lender has a way to recuperate their losses should financial troubles arise and you default on the loan.
Secured loans can be useful for a variety of reasons. With that being said, sometimes secured loans are used for financial crises such as medical bills, getting your car fixed, funding an immediately needed home repair, etc.
Line of Credit
A line of credit is a type of loan where your bank allows you to withdraw some extra money (up to a certain extent) from your checking or savings account. If you are presently in a situation where you need more money than you currently have, a line of credit comes in handy. What makes these kinds of loans appealing is that you only need to pay interest on the amount of money that you spend, rather than what you borrow.
An overdraft loan is almost exactly what its name would imply. This is a loan where the purpose is to make certain that you have enough funding to cover whatever you need in an emergency without being hit with overdraft charges. One of the more popular parts of overdraft loans is that like lines of credit, you only are required to pay interest on the money that you spend instead of what you borrow.
Fixed Rate Loan
A fixed rate loan is a kind of personal loan that comes with an interest rate that is solidly fixed for the entire life of your loan—no matter what. This can be very beneficial for someone who is working for salary payment. They can make the exact same payments each month without worrying about the payment amount changing and coming up short of funds.
Variable loans are pretty much the exact opposite of fixed rate loans. These are a kind of loan where your monthly interest rate can fluctuate to any degree at any given time. Your lender is allowed to change their prices at their discretion. That said, even though the prices can go up, they also can come back down as well.