That new car you wanted? Personal loans can help you with that. That home renovation you started a year ago? Personal loans can help you finish that. Your education? Personal loans can get you that too.

Personal loans are the catch all of the financial world. If you ever find yourself in need of money, you can usually meet that need by getting a personal loan. If used correctly, personal loans can help you meet short term goals like finishing the home renovation project you started months ago while preparing for the future. Here’s how:

Personal Loans Can Be Used For Anything

There is no restrictions to what you can or can’t do with a personal loan. How you use them is totally up to you. You can use them to soup up your car, buy a painting, or even pay for groceries. No one is going to tell you what you can or can’t do with the money you borrow.

With Unsecured Personal Loans, Your Credit Is The Collateral

Most personal loans are unsecured loans. An unsecured loan is essentially a type of loan where the creditor lends you the money with nothing but your word as collateral. In a secured loan, there is an asset—like a car or a home—that you pledge to give to the creditor in the event that you default on a loan. With unsecured personal loans, there is no such collateral. Your credit score will determine how much money you can borrow on a personal. Depending on your credit score, you will be able to get a loan for somewhere between $500 and $10,000. If you want to get a larger loan you will typically need to get a secured loan with some assets as collateral.

Personal Loans Can Build Your Credit

As was said earlier, personal loans can actually prepare you for the future. Most people are going to need a large loan at some point in the future. Most people can’t afford to pay for a house or a car out of pocket, so they need to borrow money to get one. When it comes time to get that large loan, your credit score will not only determine if you will get approved for that loan, it will determine what kind of rate you get. This is where personal loans come in.

Your credit score is determined mostly by your payment history, the amount of debt you owe, and the length of your credit history. With a personal loan, you can improve all three of these things. Let’s say, for example, you get a personal loan for $1,000 and use it to build a deck on your house. You agree to pay this loan back over the course of a year and you make all of your monthly payments. Now you have no debt, a year’s worth of timely payments on your payment history, and your credit history is one year longer. All of this translates to a better credit score which means you will be more likely to be approved and at a better rate when it comes time to apply for a home mortgage or an auto loan.

Personal loans can be considered preparation loans. If you use them right they can prepare you for the larger loans that you will need later in life, but that doesn’t mean you can’t benefit from them in the short run as well.

Interest has been described as one of the most powerful forces in the world. It tirelessly works, growing little by little, day after day, with no slack in productivity or efficiency. It can make you wealthy or it can crush you. The awesome power of interest means it’s helpful to know where you stand with it. That’s where credit reports come in. Here’s how it works:

A Credit Report Gives You Your Credit Score

Getting a credit report will tell you your credit score, a number that essentially represents your ability to make interest work in your favor. Have a low credit score? Interest will not be your friend. Got a high credit score? You and interest will get along just fine.

Perhaps just as important as your credit score, a credit report tells you how your score is being calculated. Credit scores are calculated according to the following criteria:

Payment History—35%

Amounts Owed—30%

Length of Credit History—15%

New Credit—10%

Types of Credit Used—10%

Your credit report will not only tell you what your credit score is, but it will include a report of your payment history as well as your bank accounts, lines of credit, and the amount you owe on them. It is very important to check these reports for accuracy as nearly 80% of them will contain some type of error.

Your Credit Report Can Identify Errors

Once you’ve received your credit report, you should check it thoroughly for any errors. While many of the errors on credit reports are mistakes on your personal information, address, or date of birth, it is also possible that there will be errors in your payment history and your amounts owed. These two factors make up 65% of your credit score, so it is important to ensure that they are completely accurate.

Once you have found an error you can report it to the company who generated your credit report. There are several ways to do this. Most companies will provide an easy way for you to correct your credit report if you call and ask them. It might be easiest for you to mail them a copy of your credit report after highlighting the errors.

When attempting to remove errors from your credit report, you should include as much documentation as possible. If you have banks statements, credit card statements, or any other documentation that proves a certain item on your credit report is in error, you should include a copy of that statement with relevant information highlighted. Whenever you send this type of information to credit companies, be sure to send copies of the statements rather than the originals. That way if the copy gets lost or misplaced you can make another one and ensure the error gets removed.

Credit reports are the primary way to figure out how prepared you are to use interest to your advantage. There are many companies and websites that will provide you with copies of your credit report. Many of these websites ask for a monthly fee and allow you to check your credit every month. Other websites will provide you with a single credit report for a onetime fee. More important than where you get your credit report, however, is getting a credit report. Make sure your credit report is free of errors today.

There has been a lot of conversation over the legitimacy of credit repair. Many banks and credit institutions have gone to great lengths to assert that credit repair is both ineffective and illegal. On the other hand, many private credit repair institutions have claimed to be successful in removing significant events—like bankruptcy and tax liens—from credit reports. With such contrasting claims, it is hard to tell just how effective and how ethical credit repair really is. Here is a three step guide to understanding the way credit repair works.

Credit Repair Can Remove Errors From Your Credit Report

It may surprise you to learn that your credit report contains errors. A study conducted by CBS news indicates that as many as 80% of credit reports may contain errors. The companies that compile and calculate credit scores have an enormous amount of work to do keeping track of the credit accounts and payment history for every adult American, so it is understandable that a certain number of errors are likely to show up.

The responsibility of ensuring that your credit report is accurate lies primarily with you. The process for correcting these errors is credit repair. Through credit repair you can challenge the inaccurate items on your credit report and provide documentation that the items are incorrect. The credit company then has a certain amount of time to prove that the item is legitimate or they are legally obligated to remove it from your record.

Credit Repair Challenges Have A Time Limit

After you have challenged an item on your credit report, the credit company has a window in which to verify the challenged items. If they cannot provide documentation that a certain item is accurate then they must remove the item from your credit report and your credit is repaired. While it is only ethical to challenge items on your credit report that you actually believe to be inaccurate, some credit repair companies might challenge items on your financial history that actually took place. Credit repair companies may challenge items that significantly reduce your credit score like bankruptcy or tax liens. While it is likely that the credit company has sufficient documentation to prove that these events actually took place, the credit repair company’s challenge might slip through the cracks and the credit company might fail to verify that the claim is accurate. After a certain number of days the item will be removed from your credit report automatically because the credit company failed to verify its accuracy. This is one of the fundamental tactics credit repair companies use to remove legitimate items from your credit report.

Credit Repair Might Not Be Permanent

While credit repair companies might succeed in getting a legitimate bankruptcy removed from your credit report, this might only be temporary. After the item has been removed, a credit company can get the challenged item replaced on your credit repair if it can later provide documentation of the item. So while credit repair companies might be able to remove items like bankruptcy from your credit report, it is difficult to say with certainty whether or not the improvement to your credit will be permanent.

Legitimate credit repair is important. You should check your own credit report for errors and inaccuracies and get them repaired. If you decide to enlist the help of a professional credit repair company, it would be wise to investigate their business practices and determine how they conduct their credit repair.

It is interesting to see how knowledgeable many people are about cars and how little they know about things like personal loans, credit cards, and other things that have a large impact on their financial future. While perhaps not as fun as memorizing the different makes and models of the newest cars, understanding the two primary types of personal loans will ensure that you make the best decisions for your financial situation.

Unsecured Personal Loans

Unsecured personal loans are amount e most highly advertized types of loans. An unsecured loan means that there is no collateral associated with the loan. Collateral refers to a piece of property that you pledge in the event you default on a loan. In the case of an auto loan, your car is pledged as collateral. If you default on the loan then the creditor has the legal right to seize and sell your car to pay back their loan. In the case of a home mortgage a creditor has a right to seize and sell your home if you default on the loan.

Without collateral, a lender has no easy way of reclaiming their money if you default on your loan. To better determine between dependable and risky borrowers, lenders invented the credit score. A credit score is essentially a measure of the likelihood that you will repay that money you borrow. Your credit score determines not only whether or not you get approved for a loan, but also what the rate on that loan will be. If you have a very high score you will likely get the lenders best offer on a loan, being able to borrow larger sums of money at lower rates. IF you have a credit score that is less than ideal, you will probably have difficulty getting a loan and will probably have to settle either for borrowing less money or paying higher rates on the loan.

Secured Personal Loans

Secured personal loans are loans with collateral. Again, referring to the auto loan and the mortgage, the car and the home are offered as the collateral on the respective loans. In the event that you default the lender has a right to repossess those items and sell them to make up their losses.

When compared with unsecured personal loans, it seems unlikely that anyone would choose to get a secured loan. The advantage to secure personal loans lies in the fact that they generally come at lower interest rates and are easier to get. A lender wants to know that their money is going to be repaid. If you have no credit or a low credit score, then an investor will still be willing to grant you a secured personal loan because they have collateral that can be used to repay the loan in the event that you default. Successfully repaying a secured personal loan will increase your credit score and prepare you to get larger loans, and unsecured personal loans in the future. Even if your credit score is high, lenders will still grant you a lower rate on a secured personal loan than on an unsecured personal loan because there is less risk on their investment.

While unsecured loans are less risky for you, they are usually more expensive and require you to have established credit. Secured personal loans are a perfect option for those trying to rebuild or establish credit, and are still a good option for those with good credit who want a lower rate on a loan.

A bad credit loan may not sound like a good thing, but, in fact, it might be just what you need to boost your credit score out of the subprime range. Credit scores do not exist on a 0 to 1000 scale. The lowest credit score you can get is 300 and the highest is 850, with 50% of people falling above 700. Generally, anything less than credit score of 700 is considered “subprime,” meaning less than ideal. If you have a subprime credit score you might have trouble getting a loan at all, and even if you are approved you will almost certainly fail to qualify for the best rate. Bad credit loans can change that. Getting a bad credit loan can improve your payment history which will in turn raise your credit score and help you qualify for better rates on future loans.

Bad Credit Loans Can Repair Your Payment History

When your credit score is calculated, the largest factor creditors are considering is your history of payments. Creditors want to know that you are going to be able to pay back the money they lend you, so they have developed a system of calculating your likeliness of repaying a loan. Not surprisingly, the most important factor in this system is your history of payments. If you have been diligent in making your monthly credit card payments, auto loan payments, or any other type of loan payment you might have, then your history of monthly payments. Most people with a credit score of less than 700 have struggled to make payments from time to time and have a less than ideal record of monthly payments. This is where bad credit loans come in.

Bad Credit Loans Can Boost Your Credit

While the interest rate on these loans is generally high, nearly anyone can qualify for a bad credit loan. This not only allows people with subprime credit the chance to exercise some purchasing power, but it also gives them the chance to rebuild their credit score by repairing their history of monthly payments. A bad credit loan is usually a loan for a smaller amount of money that you will then make monthly payments on. The difference between a personal loan and a bad credit loan is primarily the interest rate you can expect. Personal loans require higher credit scores, whereas anyone can get a bad credit loan, but you can still use the money from these loans in any way you choose. If you make your monthly payments then a bad credit loan will boost your credit rating and help you qualify for better rates on loans in the future.

Bad Credit Loans Prepare You For the Future

You might ask yourself, “If bad credit loans have such high interest rates, why should I get one? Shouldn’t I avoid paying interest?” While bad credit loans have higher interest rates, the fact is they actually save you money in the long run.

Not many people will get through this life without borrowing money. Even if you manage to pay cash for a car, virtually everyone will need to borrow money to purchase a home or to finance an education. When it comes time to get a home mortgage, if you have bad credit then one of two things could happen. The first is that you get approved for the mortgage but receive a very high interest rate that translates into large monthly payments. Now, instead of paying high interest rates on a bad credit loan that lasts a year or so, you are locked into a 15 to 30 year mortgage with high interest rates. What is more likely, however, is that you would not get approved for the mortgage at all. With the recent decline in the economy, lenders have been very cautious in granting mortgages to subprime creditors.

Bad credit loans can help you avoid both these situations. By getting a small bad credit loan now and making timely monthly payments, you are slowly raising your credit score closer to an ideal level. When the time comes, bad credit loans will have prepared you to get the mortgage you need at a rate you want.

Pay day loans—are they pure evil or a useful option? Having been criticized by legislators and financial advisors, payday loans have gotten a bad rap, and this is not entirely undeserved. When used wrongly, pay day loans can drive an indebted borrower further and further into debt. If you are not careful, payday loans can be a fast track to bad credit and financial ruin. On the other hand, if used appropriately payday loans can actually save you money and protect your credit. There is a wrong way and a right way to use payday loans.

The Wrong Way

There are many wrong ways to use payday loans, but they all boil down to getting payday loans for anything other than emergency expenses. A payday loan is usually guarantee din an amount of money equal to your monthly or biweekly paycheck. When your next pay check comes in, it is time to repay the payday loan, and if you do not have the money to repay the loan then you usually have to pay expensive missed payment fees. Payday loans are not appropriate for anything other than short term financial expenses. The risk with payday loans is that anyone can get one even with bad credit or no credit. There is no inspection from lenders to ensure you are capable of repaying the payday loan before you get it.

The Right Way

The right way to use a payday loan is to fill temporary gaps in your budget. When used the right way payday loans not only protect your credit, they can actually save you money. Let’s say you have a small financial emergency like an unexpected car repair. In this case, you might not have the money to make your credit card or car loan payment that month. This is a perfect situation for a payday loan.

While getting a payday loan will cost you some money, usually in the neighborhood of $20 dollars (thought the exact cost will vary on the exact size of the loan), the missed payment charge will probably be more. Getting a payday loan will help you avoid the missed payment fee, but more importantly it will protect your credit score. The largest determinant in calculating your credit score is your history of payments, so missing a payment will significantly lower your credit. A payday loan can help you make your payment on time and protect your credit. Further, because payday loans don’t show up on your credit report there will be no impact on your credit if you pay your loan back on time.

Traditional loans are included on your credit report and will lower your credit score. Lenders want to know that you are going to be able to repay the loan they give you, so lots of other loans on your credit report tells lenders that you might be acquiring more debt than you can repay. Unlike traditional loans, payday loans are deposited directly into your account and repaid with an automatic withdrawal from your account on a predetermined date. As long as you repay your payday loan on time they will not affect your credit other than to protect you from the payment you would have missed.

While payday loans can be extremely harmful if used improperly, these loans can protect you from missed payments that would damage your credit and even save you money in the process.

With interest rates as low as they have been in years, it is a perfect time to consider getting a personal loan. Getting a personal loan can help you both reach your financial goals and increase your credit score. Personal loans can supply you with the money you need to finish that home improvement project, pay for your education, or take a vacation, and if carefully managed can actually increase your credit and prepare you to get a lower rate on a loan in the future. Here is a three step guide to making the most of your personal loan.

1. Pick a Worthy Project

It doesn’t matter how you use the money you get from a person loan. You can spend it on a vacation, groceries, a car, or invest it. Whereas auto loans and home loans have to be used for cars and homes respectively, how you use a personal loan is, well, personal. That being said, certain uses are better than others. It is not a good idea to simply live on the money from your personal loans, and it might be risky to invest the money in a project that might result in further debt. While there are certainly better and worse ways you can use the money from your loan, the choice is completely your own. From a financial perspective, more important than how you use the money from your personal loan is how you pay it back and who you get it from.

2. Get The Loan

Where you get your personal loan from can make a big difference on its effect on your credit and your life. The lender you choose will determine your interest rate which will have a significant effect on your financial life. If you have an established history with a bank or a credit union, that institution might be your best option for a personal loan. Banks and credit unions that have had good interactions with a borrower are often likely to give them better rates on personal loans than they would give to new borrowers. If, on the other hand, you do not have an established relationship with a traditional lending institution, you might want to consider getting a personal loan from a website like personalloans.net. These websites often offer competitive rates to individuals with poor or no credit. It is also important to consider the terms and conditions of your personal loan. You should compare how expensive the late fees and missed payment fees are if you feel you are at risk of missing a payment.

3. Repay Your Loan On Time

A personal loan will only benefit your credit score if you repay it on time. Missing payments or failing to repay the loan in its entirety will negatively affect your credit. If you make your monthly payments and repay the entirely of the loan on time then you will improve what is called your payment history. When credit agencies calculate your credit score, the most significant factor they consider is your payment history.  Successfully repaying a personal loan will extend your history of timely payments and resultantly increase your credit score.

The advantage to having a higher credit score is it prepares you to get a better rate on a future loan. Most people will need to borrow money for a car or a home at some point in their life. When it comes time to get one of these larger loans, if you do not have credit or have a poor credit score, then you will likely get a very high interest rate on that loan if you get approved at all. Personal loans provide an excellent opportunity to use borrowed money to accomplish a project or a goal while enhancing your credit score.

Credit reports are like your financial autobiography. Whether you like it or not, your credit report is there for every potential lender to read and evaluate prior to granting you a loan. For better or worse, your credit report will be a factor in every loan you ever get, and might even play a role in getting an apartment or a job.

With credit reports playing such an important role in your life, it is a bit startling to learn that your credit report is probably inaccurate. A study conducted by CBS news estimated that nearly 4 out of 5 credit reports—80 percent of American credit reports—contain errors. While not all of these errors were serious, a significant number would have an impact on what kind of rate a borrower was able to get on a loan. Given the fact that the agencies that generate your credit report also keeps track of the credit history of every other person in America, it is not surprising that many of these reports contain errors. Ultimately, the responsibility for maintaining the accuracy of your credit report falls on you. Fortunately, credit companies have provided a process that allows you to ensure the accuracy of your credit report.

1. Get a Free Credit Report

By law, each credit monitoring agency is obligated to give you a free copy of your credit report each year. This means that if you cycle through the three credit reporting companies you can get a free copy of your credit report every four months.

There is a catch to the free credit report offer. Most of these companies require that you sign up for a monthly subscription service in order to get a free copy of your credit report. After you receive the report you can cancel and avoid paying the monthly fees. Websites like personlloans.net offer a simpler option of paying a small, onetime fee to check your credit report.

2. Find the Errors

After getting your free credit report, you should check it for errors. Every credit report contains basic personal information like name, address, date of birth, in addition to financial information like how many bank accounts you posses, how many lines of credit are in your name, and the payment history on these lines of credit. Go through your credit report with a highlighter and mark all of the errors. In the case of payment history and bank accounts, you might need to compare the information listed on your credit report with your own personal records to ensure their accuracy.

3. Report the Errors

Once you have found the errors, send a copy of the credit report with highlighted errors to the credit company. Include as much documentation as possible to support your claims that certain items on your credit report are mistakes. Always remember to send copies of these documents rather than the originals as the documents might be lost in the mail or misplaced by the credit company.

After you have reported the errors, the credit company has a window of time in which they must verify the disputed information. If they cannot prove it after a certain amount of time then the item is removed from your credit report. There is really no reason not to check your credit report for accuracy. It is free and there is no penalty to your credit for doing so. Failing to check the accuracy of your credit report could lead to paying more on a loan than you actually have to.

Thanks to your credit score, you can go online, apply for a loan, and get approved in less than 60 seconds. The mathematical algorithms of companies like Equifax keep track of your credit score and report it to any potential lender who asks for it. If your credit score is good, you will be able to get the loans you need at an affordable rate. If, on the other hand, you have a “sub-prime” credit score, then you will get very high interest rates on loans if you are approved at all. With such high consequences, it is important to understand how credit scores are calculated and what they mean. Here are three important facts about credit.

1. Credit Scores Speak to Lenders

Your credit score tells a lender how likely you are to repay your loan. That is essential what a credit score is, a numerical representation of how likely you are to repay your loan. While there are several scales that creditors can use when determining your credit score, the most commonly used scale is called the FICO score, developed by the Fair Issac Corporation of California. The FICO scale ranges from 300 to 850 with 53% of Americans falling between in the 700-850 range. To put it into perspective, the Fair Issac corporation states that a score higher than 720 should be sufficient to qualify you for the best rates on mortgages, though in the recent economy people with credit scores less than 700 seem to struggle to get loans. If you have a high credit score, that signals to lenders that you are capable of repaying your debts. As a result you will get approved and get lower rates.

2. Five Factors Make Up Your Credit Score

Your credit score is calculated by a mathematical algorithm that takes into account 5 major factors. Each of these factors is weighted differently in the calculation of your credit score. The factors that comprise your credit score are:

35% – Payment History
30% – Credit to Debt Ratio
15% – Credit History
10% – New Credit
10% – Credit Types in Use

The largest factors are your payment history and your debt to credit ratio. Your payment history refers to your record of making payments on time each month. The longer you do this, the stronger this aspect of your credit score will be. Debt to credit ratio refers to how much of your available credit you are using. If you have a credit limit of $1000 on your credit card and you are carrying a balance of $500 then you are using 50% of your available credit. Many financial advisors suggest that you use less than 40% of your available credit to maximize your credit score. By keeping your credit to debt ratio low and making your payments on time, you gain 65% of your credit score. The longer you do this, the more your credit history increases which accounts for 85% of your credit score.

3. You Can Keep Track of Your Credit Score

The easiest way to make sure you have a credit score above 720 is by keeping track of your credit. You can sign up with websites like personlloans.net to get monthly credit reports. Keeping track of your credit score will make you aware of how your spending habits are effecting your credit score.

Good credit is within your reach, but it requires careful spending and self control. By maximizing your credit score now, you are preparing to reach your financial goals in the future.

Debt consolidation is like taking an escalator out of the hole of debt. While you can accelerate the process by running up the escalator, simply standing in place will slowly but surely move you out of the hole.

How Debt Consolidation Loans Work

The basic principle behind debt consolidation loans is that you can save money by getting a lower interest rate on your debt. As of April, 2012, the average rate of interest on a credit card is 17%, which means that if you owe $1000 on your credit card, you will pay $170 in interest every year. Credit card interest rates are higher than most other loans, which means you can save money by lowering your interest rate payments.

Debt consolidation loans are a type of personal loan. While the interest rate you can get on your specific personal loan will depend on your particular credit score and repayment history, the average interest rate on a personal loan in the united states is 9.49%. When you get a debt consolidation loan, you pay off all your various sources of debt with it and then make payments on that debt consolidation loan each month.

Get Out of Debt Faster With Debt Consolidation Loans

The lower interest rate of the debt consolidation loan means that you are actually saving money each month that you can then put towards paying off your loan. This is the escalator principle.

For example, let’s say you owe $1000 on various credit cards. The average interest rate on those cards is 17%, which means you will be paying $170 in interest every year. If you get a debt consolidation loan for $1000 at the average interest rate of 9.49%, you can pay off all of your credit card debt and then pay only $94.9 in interest every year. Compared to paying your monthly credit card payments, this will save you almost $80 a year that you can put straight towards paying off your debt consolidation loan. Like an escalator, putting the money you save by getting a debt consolidation loan towards paying off the loan will slowly but surely help you move towards getting out of debt. You can make additional payments on top of your savings and get out even faster, the equivalent of running up the escalator.

Debt Consolidation Loans Simplify Your Life

In addition to the savings you gain through the lower interest rates of debt consolidation loans, these loans will also simplify your budget. Making monthly payments on several different sources of debt is stressful. If you have multiple credit cards, you probably have to make sure each is paid by a certain date each month, not to mention any retail accounts, auto loans, or mortgages you also have to manage. Getting a debt consolidation loan allows you to consolidate a large portion of your debts into a single, simple monthly payment with a lower interest rate. This not only saves you money in interest, but it also means you will be less likely to miss monthly payments and have to pay expensive late fees.

Debt consolidation loans simplify your budget and save you money. If qualify for an interest rate lower than the rate you are paying on your credit card, it makes sense to consider how a debt consolidation can help you get out of debt faster.