How To Get A Loan With Bad Credit
If you have bad credit, getting approved for a loan can seem like an impossible task. Even if you know you would make responsible payments, the banks don’t care – they want to ensure that they won’t lose money on their loans, and they don’t think you’re someone they want to do business with. If your credit score is less than ideal, but you still need money, here are 9 ways to get a loan with bad credit. Hopefully one of these will be the key to unlocking that door and getting you the cash you need!
1) If you can, avoid credit cards
There’s no quicker way to bury yourself in debt than by using credit cards. If you have bad credit, it’s best not to use them, or only use them sparingly if there’s no other choice. While building up your credit score will take time, avoiding credit cards will help keep your bank account healthy and avoid any unnecessary temptation to spend more than you can afford. A good alternative is to set up an installment loan instead of relying on a line of credit, this allows you to borrow money at an interest rate that won’t exceed 36%, which is much lower than what most credit card companies charge. You may also want to consider getting an auto loan, as these are easier for people with poor credit scores to obtain and typically come with lower interest rates.
2) Always pay in full and on time
When you’re trying to get a loan, be sure that you always pay in full and on time. Otherwise, you could hurt your chances of getting approved for another loan in the future. Avoiding late fees is also an important part of how to get a loan with bad credit. Paying just a few days late can negatively impact your credit score, which will make it more difficult to get approved for loans in the future. If you are unable to pay your bills on time, it might be a good idea to contact creditors and work out payment plans or other options that will allow you to avoid paying late fees. If you have missed payments in the past, start building up positive payment history by setting up automatic payments from your bank account. This way, you won’t have to worry about missing payments again.
3) Work On Your Budgeting Skills
Even if you have bad credit, that doesn’t mean you should be left out in the cold. Sure, it will take some extra effort on your part, and yes, there are certain limitations on what type of loans you can secure, but there are still plenty of options available. To help you get started and give yourself a boost, we’ve compiled our top ten tips for securing loans with bad credit. Budgeting is an essential skill to master when trying to improve your financial situation. Budgeting is often one of the first steps taken by those who decide they want to get their finances under control. While it may seem like a simple task at first glance, it’s much more complicated than most people realize.
4) Do not close unused accounts
Closing an unused credit card can hurt your credit score. The main reason is that there are two components of your credit score: payment history and length of credit history. Credit scoring companies want to know that you’re still using and maintaining old accounts, even if you don’t use them very often. So, keep these accounts open and active. You may not need all those cards, but you never know when one will come in handy. For example, if you lose your wallet or purse while traveling out of town, it’s good to have some backup options. Or, if you apply for a job that requires additional verification, such as renting an apartment or getting utilities set up at your home, having older account information on file can help speed up approval. If you do decide to close an account, make sure you do so by contacting customer service directly.
5) Build A Stronger Credit Score
If you want to get a loan, you’ll need good credit. Lenders almost always consider your credit score when deciding whether or not to give you money. If your credit score is low, you might not be able to get approved for new loans or lines of credit, and that could make it difficult for you to start and expand businesses. Building a strong credit score takes time, but there are steps you can take to speed up the process. Delinquent payments can hurt your credit score more than anything else, so avoid late payments at all costs! It may seem obvious, but paying bills on time is by far one of the most important things you can do if you want to build strong credit.
6) Start A Savings Account To Use As Collateral
Many banks use savings accounts as collateral when considering whether or not they should provide you with a loan. If you don’t have one, you might need to open one to get credit. Savings accounts usually carry low-interest rates; however, if your savings account has an interest rate high enough, it can act as decent collateral for a loan. You will want at least two months’ worth of living expenses saved up for your bank to be willing to provide you with financing. For example, if you spend $4,000 per month on average and only save $2,000 per month, your bank won’t consider using your savings account as collateral.
7) Find A Cosigner
Getting a loan with bad credit can be difficult if you’re flying solo. This is where you need to find a cosigner, someone who has good credit and will sign on as an additional borrower on your loan. It could be a friend or family member; it could even be someone at work or from church. The key here is that they have good credit and are willing to help you out by signing on for your loan. The idea of adding another person to your debt might seem scary, but having a cosigner can help lower your interest rate and make getting approved for a loan much easier.
8) Speak to your local bank/credit union
You may think your chances of getting a loan are dead in the water, but most banks/credit unions will work with you if you explain your situation and ask for help. And remember, Just because other banks have turned you down doesn’t mean it will happen again. Go into these meetings prepared, have all your documents ready, and don’t be afraid to ask questions. If you can prove that you can pay back what they lend you, there is no reason why they shouldn’t give it to you. Be sure to talk about how much money you make, how much debt you have and how much money you need. Remember that it takes time to get approved for a loan so don’t be discouraged if one bank turns you down.
9) Take control of your debt today.
If you have poor credit, it can be difficult to get approved for loans. However, some options could help you take control of your finances and make things better. Here are ten great ways you can take control of your debt today. In addition, many secured cards will offer low-interest rates and even cash-back rewards programs. Now that you know how to start a business and how to get a loan with bad credit, you should be well on your way to success.
If you are unable to obtain loans due to bad credit, do not fret. These days there are plenty of companies and personal lenders who can help you get out of tough situations when funds are needed most. Take advantage of these resources and search for ways how to get a loan with bad credit to overcome any obstacles that may have come your way.