Can you get a loan with bad credit? It’s possible. But you have to know what you’re doing and do it right.
Fortunately, we’re here to help. Below, we’ve written you a guide to help you improve your chances of getting approved for a loan when you have a low credit score.
Note: these tips cannot guarantee that you will be approved for a loan. But we can promise to help you avoid the common mistakes that might keep you from getting approved. To learn more, keep reading.
Improve Your Credit Score
Your first and best option is to improve your credit score by as much as you can, if at all possible. To do so:
- Stop missing payments
- Reduce your debt to 30% of your borrowing limit or less
- Keep paid-off accounts open
Also, practice good borrowing habits. For example, use a credit card for a big purchase you were already planning to make. Then, pay off this balance quickly without missing any payments.
Repairing your credit rating before getting a loan is preferable to getting a bad credit loan. That is, bad credit loans usually have higher interest rates and fees.
Compare Bad Credit Lenders
If you don’t have time to repair your credit rating, you still have options. For example, some institutions offer loans up to $5000 for bad credit applicants who no one else will approve.
Do your research on bad credit lenders and compare your options. Be sure to look at their approval requirements and their rates/fees.
Compare Bad Credit Loan Types
If you get an unsecured loan with bad credit, it will usually have to be a personal loan. Personal lenders tend to have more lenient requirements than banks. Still, this also means that the interest rate will be high in order to make this risky investment worth it to the lender.
On the other hand, consider a secured loan. These loans are made “safer” for the lender by securing them against your property instead of by raising the interest rate. The collateral property must be something of significant value, like a car or house.
Read Also: How To Get A Personal Loan Without Security?
You’ll almost always get a lower interest rate when taking out a secured loan. There’s also a better chance that the lender will overlook your low credit score.
After all, if you default on this loan and they don’t get their money, they at least get to keep your property. To that point, don’t forget the risk that you are taking when you take out a secured loan.
Get Yourself a Bad Credit Loan With These Tips
Yes, you can get a loan with bad credit. Just be careful to follow the tips in this guide to do so.
Next, would you like to learn how to maximize your personal injury compensation? Or, would you rather discover when and how to look for a legit financial advisor? Find these tips and other excellent advice on our Finance blog.