Let’s face it: no one likes being judged. But when it comes to loans, it will happen. Creditors will take a close look at your credit history and make a decision on whether or not to make loans. Lenders need to determine how risky it would be to lend money to a borrower. And if you have bad credit, you can expect to be shown the door immediately.
But do not panic! Even if you have bad credit, it is still possible to get a loan. Here’s how.
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Lenders know your credit score, and you should too. When applying for a loan, the three-digit FICO score will play an important role in approving your application. If you do not know your FICO score, you can find it in many ways. You can check your credit score for free at Experian’s Creditdorm site; you can ask your bank if it provides free credit notes; you can even request one directly from FICO themselves, but they will charge you.
So now that you know how to find your credit score, how can you improve it? Check out the OppLoans ebook credit workbook: The OppLoans Guide to Understanding Your Credit, Your Credit Report and Your Credit Score, to find out if your credit is bad, fair or good, and what you can do to this subject!)
To obtain a personal loan, borrowers with a credit rating above 720 typically pay an interest rate of 11%. Those with subprime credit pay nearly three times as much – 29 percent! For borrowers with a credit score below 550, many traditional lenders do not offer loans at all.
Good advice: Do not despair! Borrowers with bad credit still have options like payday loans for bad credit, look here.
If your credit is bad, build it
Here’s the truth: Bad credit can mean you have to pay more for a loan. It’s that simple. However, your credit score is not engraved in the marble. If your credit is currently less than you would like, the best thing to do is to build it before you take out a loan.
We know that sounds daunting. In addition, it will take a little time. But do not worry, you can do it by following these six steps.
Smart Tip: Use less than 30% of your credit card limit to improve your credit score.
Consider personal remittance lenders
Building credit sounds good, but sometimes emergencies happen and you need funds immediately. A payday loan can be tempting, but there are better options.
Personal installment lenders are one of the places to look for a bad loan. A personal installment loan can be used to cover emergency expenses or consolidate higher interest rate debt. These lenders consider many factors when evaluating a loan application – not just your credit score – so you probably have more luck with them. In addition, we do not want to brag, but OppLoans gets 4.9 / 5 stars with the Better Business Bureau® based on customer feedback. Toot Toot!
Opt for a secured loan
Secured loans are a good way for borrowers with bad credit to increase their attractiveness when applying for a loan. With a secured loan, a borrower offers an asset – a house or a car, for example – as collateral. Lenders are more likely to approve a loan because they know they can take possession of the asset to cover their losses if the loan is not repaid. Just be sure to avoid the short term and high-interest rate loans! They are definitely not worth the risk.
Smart Advice – Be careful when choosing a guarantee for a secured loan. If you default on the loan, you will lose your guarantee.
Join a credit union
Credit unions are a good option for borrowers with bad credit. They look like banks, but when you apply for a loan, they do not just rate you on your credit score. The thing, though, is that you have to be a member, so you have to convince them to grant you membership. They look at your financial health, but they also make a decision based on factors such as where you live, where you work or where you study. You can search for credit unions near you via mycreditunion.gov.
Smart advice: Professional groups often form credit unions. So try to find one for your work.
Get a co-signer
Another option for borrowers with bad credit is to get a co-signer. With a co-signer, the loan interest rate will be calculated based on the credit rating of the person with whom you are connecting. So find someone with good credit who trusts you to repay the loan. But be careful. This person will also be responsible for the payment. Therefore, if you fall behind, she will suffer as well.