Do you want to know how to get a loan with bad credit? If you have a bad credit score, here’s how you can still manage to take out a loan.
Almost one-third of Americans today have a bad credit score. Are you one of them?
A poor credit score falls between 500 and 600. A bad credit score falls between 300 to 499. Having a poor or bad credit score reduces your opportunities to borrow money.
Do you want to know how to get a loan with bad credit? If you have a bad credit score, you can still manage to take out a loan.
Read below to discover seven tips for how to get a loan with bad credit.
1. Get a Co-Signer
Getting a co-signer is one of the ways to get a loan with bad credit.
Find someone you trust who has a healthy credit score. If you are close enough with them, they may agree to be your co-signer. Most often, borrowers use family members as co-signers.
Your loan will then include your co-signer. Their credit score will determine the terms of your loan, such as the interest rate.
If you get a co-signer, remember their credit score is now affected by your payments. Don’t let them down by failing to repay your loan on time.
2. Try a Guaranteed Installment Loans
Guaranteed installment loans are another option for low credit score loans. These loans are available if you have a collateral or a stable income.
Your guaranteed installment loan separates into even, monthly payments. The monthly payment amount depends on your income. Once you provide your lender with a record of your income, they can provide an offer that works for you.
Bonsai Finance is one of the many lenders that won’t only look at your credit score. When determining if you deserve a loan, the big factor is your income.
A guaranteed installment loan provides the money you need. It also improves your credit score when you make payments on time.
3. Visit a Credit Union
Credit unions offer loans to those with bad credit scores.
Local credit unions look beyond your credit score to determine if you are a worthy candidate. These lenders take into consideration your job, repayment history, and where you live when deciding to let you join.
To get a loan through a credit union, you have to be a member. There are credit unions for military personnel, local government, industries, and more. If you look around, you’ll find a credit union that’s right for you.
The best thing about credit unions? They have a maximum interest rate of 18 percent. Many people receive high-interest rates with bad credit, but with a credit union that interest rate is capped.
4. Use a Secured Loan
Secured loans are a useful tool when looking into getting a loan with bad credit.
A secured loan is when a lender allows you to borrow against your assets. You can use your vehicle, house, or stocks as collateral to land a secured loan.
These loans offer lower interest rates and higher loan amounts than unsecured loans. The catch is that if you default on your loan, the lender can take your asset.
Only enter into a secured loan if you are certain you can repay it.
5. Look into Online Personal Loans
Online banks offer a variety of personal loans to fit every financial situation.
Online banks don’t have physical offices. Instead, they work through technology to bring you financial help. If you need a loan fast, an online bank is your best bet. You can fill out a quick application and hear back within minutes.
While some online banks look at your credit score, most of them take other factors into consideration. They may ask for your employment and education history to help them make their decision.
By using an online lender, it’s easier to shop around to find the right loan for you. Since the process is quick, you’ll have time to check out different repayment terms and interest rates.
6. Take Advantage of Peer-To-Peer Lending
Take advantage of peer-to-peer lending for more loan opportunities.
Peer-to-peer lending is also called P2P lending. This is an online platform that charges a small fee to connect you with investors who have cash in hand.
These unsecured loans that are not linked to any assets as collateral. You can apply for a variety of loans including personal, business and student loans.
You benefit by receiving lower interest rates than normal banks. Your lender benefits by earning interest on money they may not have normally invested. It’s a win-win.
7. Work on Improving Your Credit
Worried about getting a loan with bad credit? If you have time, try improving your credit score first. When you improve your credit score, lenders will offer you better loan options.
Here are a few steps you can take to improve your bad credit score:
- Check your credit report for any errors.
- Keep a low balance on your credit cards.
- Increase your credit limit on current accounts.
Lowering your total debt is another great way to increase your credit score. Look into different strategies to help repay your personal loans quicker.
Beyond How to Get a Loan with Bad Credit
Now that you know how to get a loan with bad credit, your financial worries should lessen.
But don’t take this loan for granted. Use the loan as an opportunity to improve your financial status. Continue to improve your credit score and move forward to financial freedom.
Try these tips to improve your finances:
- Build a healthy emergency fund. This will remove the need for small loans in the future.
- Create a budget and stick to it. It’s essential to live within your means.
- Study your credit report and focus on improving your credit score.
- Try to pay down your debt early. This reduces the amount of interest you pay in the long run.
Need more financial advice? Read here to discover the top tips for managing your savings.
Make sure to visit The Phat Startup finance category for more business and money-related advice.