HOW TO QUALIFY FOR A LOAN WITH LOW CREDIT
Getting a loan with bad credit may seem impossible, but I assure you it’s not! You may be baited into high interest rates and the such because of your credit, but there is also another way to qualify for a loan with bad credit and we will discuss it in this article. With a lower […]
Getting a loan with bad credit may seem impossible, but I assure you it’s not! You may be baited into high interest rates and the such because of your credit, but there is also another way to qualify for a loan with bad credit and we will discuss it in this article.
With a lower credit score you just aren’t going to have as many options as those people with a higher credit score. But with the right preparation, you can avoid getting a loan for the wrong price.
The question is. What is really considered bad credit?
What’s bad credit?
A bad credit score refers to a credit history that contains all sorts of problems such as defaults and bankruptcy records.
When you’re looking to qualify for a loan, you should know your credit score because lenders know your score. That three-digit number is the difference between getting approved or not. If you don’t know your credit score, there are many ways to find out. You can ask your bank if they provide a free credit score, or even use a site that offers a free credit report. Once you see your credit score, think about if it’s good or not. If it isn’t good, then you will need to start improving it as soon as possible.
When it comes to getting a loan, borrowers with a credit score above 720 tend to pay a 10% – 11% interest rate while people with a “bad” credit score will have to pay almost triple that! Any person with a credit score lower than 550 will most likely not get a loan offered to them at all.
Now that you understand the fundamentals behind credit scores and just how important they are. Let us talk about how to qualify for loans with a bad credit score.
Credit Unions are a great option for people looking for a loan whilst they have a bad credit score. Rather than give you a loan based on just your credit score, they look at your financial health, where you live, where you went to school and where you work. The thing is, you must be a member of that credit union, and you have to convince them to give you a membership.
Build your credit
Even if there are credit unions that you can loan from, having bad credit will result in you having to pay more for a loan, but that credit score isn’t set for life, it can change if you build it up. It may seem like an impossible challenge, but you can definitely do it if you put your mind to it.
While searching for a credit union that will help you may not turn out to be fruitful, there is another option that may help you with your troubles. You can always try out online lenders, people who you’ve built a bond with and can trust you. You can borrow from peer-to-peer lending services or marketplace lenders.
Make Use of Collateral
With a lower credit score, most firms will not help you because they do not want to take the risk associated with giving you a loan. To appeal to the lenders, you can always offer an asset to them such as a car or your home as collateral. This would make it more appealing to the lenders and would entice them into giving you a loan. Make sure that the loan is not short term or a high interest title loan because the risks associated with those are not worth it.
Lend from Family and Friends
This is a last resort for those who have very low credit scores. In this case, your family and friends might be the only ones left to help you. Even If they do decide to help you, you should make sure that everyone involved feels protected by drafting the loan terms, and making sure there is a third party there as the middleman and will help process the payments
In summary, there are many things to you can do to qualify for a loan with a bad credit score. They are the following:
Seek help from credit unions
Build Your credit
Try working with online lenders
Offer collateral to the lenders
As a last resort, borrow from your family and friends