You’ve been there. You filled out a loan application only to watch it thrown out because you have bad credit. After filling out another and still another with similar results, you wonder whether you’ll ever get a personal loan. The good news is you can. But you’ll first need to do the following.
1. Know Your Credit Score
Before filling out that loan application, know your credit score. And more importantly, understand how it affects you. For instance, with an excellent score, you pay 11 percent interest on a loan and with a fair score, 29 percent. But with bad credit, you rarely get a chance to pay interest because no one lends to you.
2. Improve Your Score
Once you know your credit score, don’t leave it at that. Improve it by doing the simplest of things. For instance, pay your bills on time to improve your payment history, which accounts for one in every three points on your score. Next, use less than a third of your credit card limit instead of maxing it out. And finally, pay off or lower your debts.
3. Borrow From Credit Unions
Credit Unions comprise of members from and who serve the needs of the communities in which they’re based. As a result, their loan requirements are not as strict as those of conventional banks. Despite noticing your bad credit, they may still approve your loan. The only catch is that you must live in, work in, or hail from the local community.
4. Consider Secured Loans
Lenders withhold loans from you or anyone with bad credit for obvious reasons. If you default on the loan, they lose their money. However, there’s one thing you can do to make them consider your application - offering collateral.
By securing a loan against a valuable asset, such as a car or a house, you ease the lender’s fear of losing money. After all, when you default on your payments, they can simply repossess and then sell the asset to recoup their losses.
5. Opt for a Co-Signed Loan
If you’re unwilling or unable to put up a valuable asset as collateral, approach a friend or relative with good credit to co-sign your loan. This way, lenders overlook your bad credit and base their interest rates on the score of your co-signer. In addition, they consider you less of a risk because if you default or fall behind on your payments, they can always go after the other party.
6. Get Another Credit Card
In the past, your chances of getting a credit card when you had poor credit were slim to none. Fortunately, that’s no longer the case. Credit card companies have relaxed their earlier tough stance on credit scores and now offer bad credit credit cards. All you need to do is to find a suitable provider and you’re good to go.
Although bad credit makes it hard for you to get a personal loan, you can still get one. But first, you must know your credit score, understand how it affects your ability to obtain a loan, and then improve it. Afterward, approach sympathetic lenders and credit card issuers. Or, find a cosigner or collateral to secure a loan against.
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