How Difficult Is It to Qualify for a Personal Loan?
An unsecured personal loan can be just what you need when you are experiencing a temporary gap in your income. It can also help you recover from a financial setback; if you use a personal loan to pay off medical debts or credit cards, you will pay less interest over time. This is known as debt consolidation, and it has helped many borrowers avoid defaulting on their debts or filing for bankruptcy. It is easy for lenders to advertise unsecured personal loans as a catch-all solution to people’s financial problems, but there are several caveats. First, personal loans do not solve the problem that stuff is too expensive and your income is insufficient to cover your expenses; if you borrow them for that purpose, you will eventually end up in even worse financial trouble. Second, qualifying for a personal loan is not a given; unless your credit score is high, unsecured personal loans have high interest rates, and if it is too low, lenders might not even be willing to lend to you at all. To find out more about personal loans and how you can use them to tackle your debt situation, contact a Jupiter debt lawyer.
When It Comes to Income and Credit Score, Slow but Steady Wins the Race
Yes, your history of borrowing and your debt-to-income ratio are factors in your credit score, but that is cold comfort to those of us for whom qualifying for home mortgages or for credit cards with credit limits above $10,000 is a distant dream. Making payments on time counts toward your credit score, but the bad news is that the credit reporting bureaus do not pay attention to all kinds of bills; the 99 percent may pay our rent, utilities, and BNPL payments on time each month with little or no benefit to our credit scores. The good news is that your income is also a factor, and earning a steady paycheck can improve your credit score and help you qualify for loans, even if you don’t have a cushy job with a six-figure annual salary.
Imagine that Glamorous Gabby, whose income comes from freelance gigs as a fashion model, and Plain Penelope, who works at Miami Grill, have both made approximately the same amount of money in the past five months, but Gabby received the income as a lump sum after a photo shoot for a clothing catalog, and Penelope earned it a few dollars at a time, slicing gyro meat and changing the frying oil. Both Gabby and Penelope have applied for a personal loan in the same amount. Penelope may have an easier chance of getting the loan, or she may get a lower interest rate, because the lender can tell that she will have enough money each month to make the minimum payment. The lender can be less sure that Gabby will be able to make her payments month after month, because neither she nor the lender can be sure of when her next freelance gig will be or how much it will pay.
Work With a Debt Lawyer About Debt Management for Gig Workers
A South Florida debt lawyer can help you manage your debt situation if your income comes from freelance work. Contact Nowack & Olson, PLLC in Jupiter, Florida to discuss your case.