Did you have an unexpected expense come up but have bad credit? Don’t panic. Read on to find out how to get a loan with bad credit.
Is your credit score below 601? If so, you have what’s considered to be a bad credit score.
If you’re in need of a loan and just found out your credit score is not up to par, don’t panic. Nearly one-third of Americans are in the same boat.
The good news, too, is that there are still loans available to you even if you don’t have a good credit score. There are also strategies you can implement to increase your chances of getting approved for these loans.
If you’ve been wondering how to get a loan with bad credit, keep reading.
Listed below are some tips that will help you get the money you need.
Types of Bad Credit Loans
First, let’s go over the types of loans you might be able to qualify for even with bad credit:
Bad Credit Personal Loans
For most people in your position, the best loan option is a personal loan designed for folks with bad credit.
Bad credit loans are personal loans that typically come with higher interest rates than traditional loans. They often have lower borrowing limits as well.
The pre-approval process is relatively easy for these kinds of loans, and most people, even those with bad credit, can qualify for them.
Home Equity Line of Credit
If you have a loan-to-value ratio of 80 percent or less, you might be able to qualify for a home equity line of credit.
This is a type of home loan that allows you to borrow money against the equity in your home.
This type of loan, obviously, is only available to certain homeowners. It’s not an option for everyone. But, those who do own their home and have a sufficient loan-to-value ratio can benefit from them.
A secured loan is a loan that requires you to offer something up as collateral.
It might be your home, the title of your car, or another valuable asset. If you do not make your payments on time, the lender has the right to seize that asset to recoup the loan amount.
A secured loan can be a viable option, but you need to make sure you can make the payments the lender requires before you agree to it.
Peer-to-peer lending sites allow you to obtain a loan from an individual lender, rather than from a bank or credit union.
Peer-to-peer lenders often are more willing to work with folks who have bad credit scores. In many cases, their interest rates are often lower than traditional lenders, too.
How to Get a Loan with Bad Credit
Do any of these loans pique your interest? If so, follow these steps to increase your chances of getting approved for one of them.
Check Your Credit Report
If you’re trying to get a loan with bad credit, the first thing you ought to do is to check your credit report.
This will help you figure out your credit score, and you can also make sure there aren’t any errors that are bringing your score down.
If you do notice any errors, get them corrected before you apply for a loan.
Reach Out to a Credit Union
If you have a bad credit score, you’ll have a better chance of getting approved for a bad credit loan if you apply at a credit union.
Credit unions usually have slightly more relaxed policies and may work with you if you can prove your employment history or show that your income is sufficient to cover the cost of the loan.
Work with an Online Lender
Like credit unions, online lenders are also often more flexible than traditional banks.
You can work with an online bank to apply for no credit check loans and bad credit loans, or you can apply for a loan on a peer-to-peer lending site. Both are viable options that could yield better interest rates and loan terms.
You’ll also, in most cases get the money you need a lot faster when you take this approach.
Get a Co-Signer
If you want to get approved for a loan with better terms and interest rates, you might want to consider working with a co-signer.
A co-signer agrees to the terms of your loan with you. He or she also agrees to take over the payments if you default.
This can be a great option, but it’s also a big responsibility for the co-signer, so it can sometimes be hard to find someone who’s willing to take this approach with you.
Compare Rates and Terms from Various Lenders
Finally, be sure to compare the loan terms and interest rates from various lenders before you make a decision.
Don’t just work with the first lender who approves your application. Take your time and make sure you’re getting the best rates possible.
How to Improve Your Credit
If you don’t need money right away, you might want to consider waiting until you can build up your credit before applying for a loan.
If you wait until your credit score improves, you can increase your chances of getting approved. You’ll also likely get approved for a loan with better terms and interest rates.
How do you go about improving your credit score? Start by implementing these tips:
- Pay down your debt
- Pay your bills on time
- Keep your balance low, and pay it off in full each month if possible
- Don’t make a habit of applying for and opening new credit accounts
- Don’t close your unused credit accounts
These simple changes can help you improve your credit score, often within just a few months.
Want to Learn More About How to Get a Loan?
Implementing these strategies will make the process of figuring out how to get a loan with bad credit much easier.
Remember, too, that once you get approved for a loan, you can start working on improving your credit. If you make your payments on time, you’ll find that your credit soon starts to get better.
Do you want to learn more about getting approved for a loan? Or, perhaps, the different types of loans available to you?
Whatever information you need, we’ve probably got an article covering it in the loan section of our website. Check it out today!