It’s stressful to have a bad credit score. It may affect how you’ll secure a loan from banks, unions, and lending companies.
You may think that it’s already impossible for you to take loans, but that’s not entirely true. Fortunately, you can utilise some ways to get the loan you need for an emergency or any necessary expense.
Here are some of those ways.
1. Shop Around
Personal borrowing is difficult with bad credit. You may not qualify to secure loans with better interest. But this doesn’t mean you’re stuck with bad deals. For instance, you may try shopping around or checking your bank first.
If you have a good history with your bank, you can use it to your advantage. The bank may still help you secure a loan with a forgiving interest rate despite knowing your spending habits and economic situation.
An alternative is to check online lenders. Visit several lenders and find one with agreeable loan terms. You must spend some time finding a reputable lender to ensure you’ll not spiral into a debt trap. Search for lenders such as Money Trumpet and other prominent online lenders that make it easier for borrowers with bad credit to secure a loan.
2. Get Your Most Recent Credit Score
Do you know your credit score? You may have realised that you have bad credit, but you’re not accurately sure how bad it is. Take your time to know what your credit score is. Also, you must know that there are different credit scores from different credit bureaus. And your score may appear favourable or problematic depending on the score range you’re looking at.
For example, a score of 420–465 may be considered a good rating by Equifax, but having that same score in Experian may translate to a very poor rating.
Getting to know your credit score is will be helpful when applying for a loan and avoiding having a worse credit score in the future. And to keep yourself updated, ask your bank to send your credit score maybe once every 12 months.
3. Get A Co-signer
Getting a co-signer is helpful when securing a loan with bad credit. It involves approaching a person with good credit and asking them to co-sign for a bad credit loan. The lending company or bank will use the credit score of your co-signer to establish your loan terms.
It’s important to understand that your co-signer will be equally responsible for repaying your loan. Thus, if you’re unable to pay the loan or you make a late repayment, you both suffer, which might lead to a strained relationship between the two of you.
On the other hand, if you follow up and ensure you make timely payments, this will improve your credit score, making it easier to secure future funding without a co-signer.
4. Submit A Formal Application
It’s advisable to conduct enough research about the loans available to you. Use the findings to choose the offer that works best for your budget and situation. Once you have selected your preferred loan, submit a formal application. You must do this only once because it can start a hard inquiry on your credit report, which may negatively affect your credit score.
Depending on the lender, you’ll be required to submit a different kind of documentation. In most cases, lenders will require you to prove your income and monthly expenses. The following are some of the other pieces of information your documents need to provide during your application:
- Security number
- Proof of address
- Preferred bank account
- Outstanding debt
- Education history
Letting your lender obtain those details can make it easy for them to gauge your financial state and capacity to repay your debt. However, before submitting your application, you must go through the terms and conditions of your loan term.
5. Apply For Secured Loans
Even with bad credit, you may get a secured loan. The reason behind this is that with a secured personal loan, you’ll surrender some of your valuable assets—referred to as security or collateral—to the lender. The collateral may be in the form of your car, property, jewellery, or even your future paychecks.
The collateral will reassure the lender that you’ll pay your loan or, at the very least, avoid losing too much if you fail to repay. Remember that if you don’t make timely payments, your property could be at risk depending on the loan terms.
As discussed above, it’s possible to secure a bad credit loan, but you may have higher interest rates. To avoid going through this again, ensure you improve your credit score and don’t delay or skip your current personal loans.