How To Get A Loan With Bad Credit - What Are Your Options?
Are you wondering how to get a loan with bad credit, or if it is even possible to do so? Perhaps you need a bit of cash to get you through an emergency, or you want to start a small business to take advantage of an immediate opportunity. Maybe you are just sick of bankers looking down their nose at you denying you approval for loans based on your history.
Whatever the reason, you may be able to get a loan in spite of a low credit score, but there are some important considerations to take into account when looking for one that will make your efforts more profitable.
Sorry - Traditional Bank Loans Are Out
It can be next to impossible to get a traditional bank loan if you have poor credit. However, if your credit score is low but not terrible, you may be able to get a loan from smaller lending sources such as credit unions.
These organizations tend to be more personal than large banks and often loan officers are able to have a little more leeway rather than simply disqualifying you based on your credit score.
The Future - P2P Lending
Another source that is growing in popularity is to use peer to peer lending options. There are several websites designed to help people meet to borrow and lend to each other directly. This works to cut out the middleman and let you borrow directly from an interested person looking to earn a little money from interest.
Your credit will still be a factor in qualifying these loans. You must disclose your credit score in order to sign up for these sites, and potential lenders will be able to see it.
However, since it is real individuals doing the lending they may be willing to accept a lower score after you explain yourself.
If your credit is terrible you may still have trouble finding a loan. If this is the case, consider loans guaranteed by collateral. This means that you put up something of value, such as expensive jewelry or your car title, against the loan.
When Your Word Is Not Enough
This is the idea behind pawn shop lending, and also the foundation for a home loan. In each case the terms may differ and the size of the collateral may change but the idea is the same. When people are trying to find out how to get a loan with bad credit, most commonly they are referred to payday loan options or personal loans. If you default, the lender gets to keep your collateral to pay your debt. If you go this route, be absolutely sure you can pay it back or that you can stand to part with your collateral.
For example, it will not do you any good to use your car to get a loan only to default and lose your only mode of transportation.
Payday loans are another option for people with very bad credit. Generally they do not check your credit at all and simply look at your income to determine your ability to repay. However, these should only be used with great caution. The interest rates are extremely high and many people find themselves trapped in a spiral of taking out multiple loans. Only use payday loans if you are certain that you can pay them back quickly. Like fire, they can be incredibly damaging, but also incredibly helpful if managed properly.
Leveraging Relationships
Finally, you can always ask friends or family for assistance. It can be embarrassing to do so, but often you can get the help you need without paying very high fees and with a more relaxed repayment plan. Only do this if you are certain you can pay it back. It may not hurt your credit to default on a loan from friends or family, but it can destroy your relationships with them.
Additionally, family and friends often feel that lending you money gives them the right to get involved in your personal matters, complicating relationships.
In addition, if the loan is large enough they may choose to take you to court if you cannot pay which can hurt your credit and your finances.
Revolving Credit When You Need It
If you suspect you may need to take out an occasional loan to get you through lean times, you may want to consider getting a secured credit card. These are cards with low limits, generally $300 to $500. You put up that amount of money when you open the card, so the bank does not have to worry about the possibility of default. These cards offer you a way to have a constant line of emergency credit.
In addition, using a secured credit card responsibly can help you repair your credit. When you are able to get a traditional credit card and close your secured card, the money you put up is returned to you.
It pays to be careful during your search for credit. If you are looking for a larger loan, it may be worth it to check your own credit score before you begin talking to potential lenders. Familiarize yourself with your score and make sure that everything is correct. Identity theft or mistakes that may be lowering your score.
Only go to lenders who you think you have a chance of working with. The reason for this is that too many credit checks in a short time frame can actually further hurt your credit score.
In addition, make sure you read all the fine print and thoroughly research your lender and the type of loan you are taking. There are many unscrupulous businesses that prey on people with low credit scores. A thorough reading and understanding of the loan documents will help make sure you are not taken advantage of. Know what the costs of borrowing are ahead of signing on the dotted line.
Although it can be difficult to figure out how to get a loan with bad credit, it is possible. There are many options available for a variety of situations. Take your time and do your research to be sure you get the best loan for your needs.
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