Are you trying to get a loan, but have bad credit? Here are some steps on how to get approved for a loan with bad credit.
It would be nice if we all could always afford what we need directly out of pocket. But most Americans, at one point or another, will need to take out a loan. These loans might help us go to school, buy a home, or start a business. They may be large in size or relatively small.
No matter what details, one thing is true: you will be judged prior to receiving a loan. It’s an unfortunate truth, but a truth nonetheless. If you have a bad credit score, it can prevent you from obtaining a loan that you might really need.
What can you do in such a situation? Though being rejected for a loan can be frustrating, it doesn’t have to be the end of the road. Read on, and we’ll walk you through a few ways to get approved for a loan with bad credit.
Improve Your Credit Score
The simplest way to secure a loan after having a bad credit score is to just improve your score. It may sound overly simplistic, but it’s the truth: there’s no better tool for securing a loan than a strong credit score.
There are a few key ways you can help to get a low credit score up. The biggest involves your spending habits and history. If you aren’t already, try to cut back your spending on credit. Only use your credit card to buy things you can afford with the money you already have. Then pay off your credit card promptly when you receive your bill.
The less you spend on your credit card the better, as long as you’re paying back what you do spend. Credit card lenders like to see people with high credit limits spend only a small fraction of their available credit. Such behavior over a number of months can help to improve your score.
When it comes to securing a loan, most lenders like to see a score of 720 or above. This is a pretty good score, and if you’re already low, it can take some work to get back to this point. But with the consistent implementation of responsible credit use, you should be able to get your score back up to a reputable state.
Try Going to a Credit Union
But what if you can’t wait the months required to get your credit score back up? There are more options you can explore.
Most of the time, those looking for loans will try their local bank. But banks have fairly strict lending requirements and a strong credit score is almost always a requirement. But there are some smaller financial institutions that still might be open to helping you out.
A community-based credit union is one such place. A credit union might be willing to look beyond your credit score history if you show good character and a promise to repay their loan. A credit union is also a smart place to get a loan from because most unions place a cap on how much their interest rates can rise to.
Not only will you be able to potentially qualify as a credit union, but the money you owe might end up being cheaper as well.
You’ll still need to make a good impression on the credit union employee. You’ll want to put together a strong package that explains how you are and what you want this particular loan for. In this package should be your employment and wage information, a list of your personal assets, and your current bank statements.
Any other materials that can display your ability to pay back their loan can help make a stronger case for your approval.
Consider a Personal Installment Loan
The good news about personal installment loans is that such lenders often consider much more than just a person’s credit score. That means if you have a bad credit score you’ll have a much better chance with these lenders than you would with a traditional bank.
Some lenders require that you offer other promises or assets in lieu of a strong credit score. For example, there are personal loans with Cosigner that require another party to sign with you. This means if you fail to pay back the loan, the person you’ve signed with will be responsible for paying back the money.
When you sign with a cosigner, it is that person’s credit score that is considered. Your interest rate will be assigned based on your cosigner’s credit score.
This arrangement is intended to keep the borrower responsible and helps increase the lender’s confidence that they’ll see their money back. It ends up as a win-win for both the borrower and the lender.
The person taking on the majority of the risk in this situation is the cosigner. A borrower will need to find a friend or family member who really trusts them and is willing to sign on for the loan.
You can check on the reputation of personal installment lenders on the better business bureau’s website. You should always try to work with reputable lenders in order to ensure the safety of your financial future.
Get Approved for a Loan with Bad Credit
It can be very difficult to get approved for a loan with bad credit. More often than not, credit scores are the main criterion lenders use to judge potential buyers. The above options are good avenues to explore if you have bad credit but still need to borrow money. Need more financial advice? Check out our blog for more.
Can Someone with Bad Personal Credit Score Get a Business Loan?