Learning The Difference Between Credit Card Loans And Secured Loans
People who are new to the world of credit need to learn the difference between Credit Card Loans and secured loans. Knowing the difference between loan types can help prevent borrowers from messing up their credit scores. Understand that credit isn’t just used when people apply for loans. When people get insurance quotes, insurance companies now use credit scores to help determine the rates they will pay. Apartment complexes might run credit checks on potential tenants. There are even employers who run credit checks on job applicants. Mistakes with credit can easily haunt other areas of a person’s life.
Credit Card Loans aren’t backed by any collateral. A lender will review an applicant’s information before deciding whether or not to extend credit. They want to assess the applicant’s ability to pay back the loan. Lenders will look at job history, living arrangements, income, and what the applicant’s credit score is. They will also review credit reports to see if there are any signs that the applicant might have trouble paying back the loan. For example, a person might have a great credit score but might have a credit card that has a high amount of usage on it. This might get a person’s application denied. People can visit Phfcu.com or the websites of other financial institutions to find out more about credit cards.
A secured loan is different than a loan with a credit card because it is backed by something that the lender can take possession of if the loan isn’t paid back. Secured credit cards are backed by money that a person hands over to the lender. As long as the terms of the loan are met, the money is just held by the lender. Secured loans can also be backed by houses, cars, boats, and other property with value. In some cases, lenders will conduct hard pulls on credit files before issuing secured loans to applicants. It’s important for applicants to know whether or not their credit files will be pulled for secured loans. Too many hard inquiries can affect a credit score and hard inquires stay on a credit report for two years. You can follow them on Twitter.