While no one enjoys being judged on their financial status, this is exactly what will happen when you apply for a loan. Your credit history will be examined closely before creditors decide to lend you money. They have to determine the amount of risk you present before issuing you a loan. A bad credit score typically will disqualify you immediately. The following explains how to get a loan even if you have poor credit.
Understand Your Credit Score
Lenders are always aware of your credit score, and you need to know it as well. That score will determine whether or not you will be given a loan. You can obtain your score for free from Experian, you can ask your bank to provide it and you can ask FICO directly for it, although this requires a fee. Once you have your score and understand what it means in terms of getting a loan, you can work on improving it. In general, those with a score over 720 will pay the lowest interest rates. If your score is lower, you will pay three times as much interest. A score under 550 will likely block you from getting a loan.
Avoid Payday Loans
If your credit score is too low to get a loan, you may be tempted to get some quick cash by taking out a payday loan. This type of loan is a dangerous proposition because even though getting the cash is easy, the interest rate can be a whopping 350 percent. This is how unscrupulous lenders trap desperate people in an endless cycle of debt. Even if you badly need money, stay far away from payday loans.
Try a Personal Installment Lender
While building up your credit score is the best way to get a loan, it is not a practical solution in an emergency situation. One option you can consider is a personal installment lender. You can use this type of loan to pay for an emergency or to consolidate debt and pay it off at a lower interest rate. Personal installment lenders will look at other aspects of your financial history and not just your score. You may have a better chance at getting a loan this way.
Get a Secured Loan
If you have own a car or a house, you can opt for a secured loan. You have a good chance of being approved because you are offering something of value as collateral. The lender knows they will receive the collateral if you default on the loan. Make sure you are able to repay the loan before taking it out or you will lose your collateral. You should also avoid short-term title loans because they come with high interest rates and are riskier than loans secured on property with bad credit.
Join a Credit Union
While a credit union operates much like a bank, it takes many factors into consideration when approving a loan. This is a good option if you have poor credit, but you do have to be a member of the credit union before you can apply for a loan. Membership is decided on your financial health, your employment, your education and where you live.
Ask Someone to Co-Sign
As a last resort, you can ask someone you trust to co-sign a loan for you. This has the advantage of a lower interest rate because the co-signer’s financial health will be considered during the approval process. Just remember that if you do not repay the loan, the co-signer will be responsible for it. Choose the right person and have a solid plan in place.
Bad credit does not have to stop you from getting needed cash. Following the tips above will connect you with the right lender.
