Establishing a good credit line can be difficult for people just entering the work force like our latest client. He is working as a waiter at a well known restaurant, making good tips and setting up his new apartment. He does not have a lot of expenses or debt such as a car loan or other loans. Having recently moved into his apartment and recently started a job he has little in the way of a credit rating. He had to purchase just about everything he needed on credit and now wants to be approved for a $10,000 personal loan so that he can pay off the credit and focus on the personal loan. He will pay much less interest as a result and be able to repay this small debt more quickly.
His only mistake was to spend the money before applying for a personal loan. Obtaining a personal loan under these circumstances can be difficult sometimes when just starting out due to lack of history of any kind in terms of paying rent on time, paying car loans on time, paying utility bills on time and paying for any debt on time. He is considered a higher risk just because he does not have the credit rating history to show that he is dependable and is a good credit risk.
This consumer has several options to consider. He can just focus on repaying the credit card debt as quickly as possible putting everything he has in terms of cash towards it. Yes he will pay more interest, but it is the easiest option if he cannot get approved for a personal loan.
He can also apply for a higher interest personal loan. It will still be lower than his credit card and he will pay less interest. He really should focus on repaying this loan as quickly as possible as well to reduce the overall interest that he pays.
Finally he can ask someone, maybe his parents to cosign on the loan so that he is able to obtain a low interest loan. It does mean that his cosigner takes on the risk of having to pay the loan if he defaults. He will pay less interest as a result and should work hard to repay this loan as quickly as possible.