5 Tips to Help You Get a Loan with Bad Credit
Friday, March 17, 2017, 6:00 AM | Leave Comment
Bad credit is a problem. Very few of us can have a credit report with the score in the middle of 700 and 800. There are plenty of reasons that we fail. I have already discussed the reasons in my previous articles.
Bad credit loans
In this article, I’d like to talk about something else. We know that it’s difficult for people with bad credit to get loans. But that doesn’t mean they can never get a loan from any lender.
There are some hacks, which make it easy to obtain a loan. I’ll discuss those hacks in this article. Read on if you are looking for a loan, with a bad credit history.
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Peer to peer lending
Credit reports are for creditors to see. They are professional lenders, and they want to make sure the lender is able to repay the loan. But if you take a loan from one of your peers, then you’d be exempted from facing rigorous scrutiny procedures. Besides, you can have the loan at a low interest rate. The interest rate can be as low as 6.5%, which is unthinkable in case of mainstream lending.
In the case of peer to peer lending, a borrower posts everything related to his requirement, which includes the amount of money he wants to borrow and the reason he wants to borrow it. Investors go through the loan listing, and even check the borrower’s credit history. However, they are way more considerate than banks, and thus, they may grant a loan even with bad credits.
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Find a co-signer
Sometimes, people with a good credit history jointly sign a loan with others, who have a bad credit history. Finding a co-signer might appear a daunting idea, but in reality, it’s not. Ask your friends, acquaintances, relatives and colleagues if they have a good credit history, and if they do, then request them to co-sign a loan.
Remember, co-signing affects a person’s credit score, and that’s why, most are not willing to co-sign loans. If you fail to pay off the debt, then the creditor would ask the co-signer to pay the whole amount. If he couldn’t or pays it but not on time, then his credit score will reduce. So, make sure the person, who’s co-signing, has full trust on you.
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Ask family and friends
What if peer to peer lending networks reject your applications, and you couldn’t find a co-signer either? Well, you ask your family members and your friends directly for a loan. Sometimes, people are not willing to co-sign, but they agree to lend money directly.
Your friends and family members know you. So, you’d have an easy time earning their trust. You can persuade them by saying you’d sign a written contract with them. The contract needs to specify all clauses related to the loan such as the interest rate, the payment terms, the collaterals, etc. Bear in mind if you are taking a mortgage loan, it must be a fully secured one.
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Unsecured loans
An unsecured loan is not recommended. But if you are not able to manage a loan from anywhere because of a bad credit history, then you might have to opt for it. There are networks that offer unsecured loan. Such networks don’t find investors; they arrange the money themselves. An unsecured loan comes with a limit, which is around $20000-$50000.
The benefits of such loans are too many. You don’t have to pay any loan origination fee, you get the loan quickly, maybe the same day you apply, you can choose the payment terms from a pool of options. However, there are some problems with an unsecured loans.
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Credit unions
If you don’t like the idea of taking unsecured loans from suspicious lenders, then apply to credit unions. These organizations are similar to banks, but they work differently. They are owned by several members. Unlike a bank, a credit union doesn’t eye at profit. That’s because it’s a non-profit body.
The money earned by the organization are distributed among its members. The money is not directly handed over, but lower fees are offered. Before applying to a credit union, bear in mind that there are plenty of them, and they offer loans at competitive rates. To get the best rate, and flexible payment terms, compare their offers, and only after then decide on one of them.
Summing up
The five tips can help you get a loan when the hope of getting a loan is almost nill because your report shows bad score. So, follow the tips and let us know your experiences.
What do you think of the tips discussed here? Do you agree with them? If no, then why? Do you have any tips of your own? Let us know in the comment section.
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Tina Roth is regular finance blogger who loves blogging about everything about money management and personal finance at her finance blog. You can reach her at @ProFinanceBlog on twitter.
