Excellent credit can do wonders for your finances. This is particularly true if you find yourself in need of a loan.
It doesn’t matter if you’re seeking funds for a home improvement project, car, or vacation house, excellent credit puts you in position to receive an immediate approval.
If you check your credit score and it’s 800 or higher, you should feel good about your ability to attract competitive offers from multiple lenders.
Here are three types of loans to consider:
1. Personal Loan
The benefits of a personal loan run deep. Here are some reasons why it’s a popular choice among consumers with excellent credit:
- No collateral required
- Competitive interest rates
- Variety of terms, typically ranging from 12 to 84 months
Since lenders don’t require collateral for a personal loan, excellent credit is a must. This gives the lender confidence that you’ll repay the loan in full and on time.
2. Home Equity Loan or Line of Credit
With these two options, you’re using the equity in your home to secure a loan. Since your home acts as collateral, the lender is more comfortable offering you a lower interest rate.
The only thing you have to concern yourself with is defaulting, as this will put your home at risk of repossession.
While both these products use your home as collateral, there’s a key difference. With a loan, you borrow a specific amount of money and repay it over the course of a predetermined number of months.
Conversely, a line of credit is more like a credit card. You can borrow as much money against the line of credit as necessary (up to your limit). As you pay it back, you can then access the funds again.
3. Short-term Loan
If you’re looking to secure a low interest rate without much, if any, delay, a short-term loan should catch your eye.
These are typically repaid over the course of several weeks to 12 months. Just the same as a personal loan, no collateral is required.
Is a Credit Card a Better Option?
Along with these three types of loans, don’t overlook the benefits of a credit card.
With excellent credit, you’ll qualify for the best offers. From cash back offers to reward credit cards, there’s nothing stopping you from getting a good deal.
Some of the benefits of a credit card, as opposed to a loan, include:
- Ability to get something, such as points or cash back, in return for the money you spend
- Immediate approval
- Easier to manage
You may opt against a credit card in the end, but it’s at least an idea to consider.
Excellent credit gives you the confidence you need to apply for the loan or credit card that best suits your personal and financial requirements.
Since you’ve proven yourself to be a reliable borrower, lenders are more likely to approve your application and give you the best terms. What more could you ask for?