Bad credit is a problem. High credit scores are not common. Only a few of us have a credit report with a 750 plus score. There are plenty of reasons why most of us don’t have perfect credit scores. Life can and will get difficult. Often these hardships have a financial impact. Thus, many of us have bad credit.
Methods to Get a Loan with Bad Credit
It’s difficult for people with bad credit to get loans. But that doesn’t mean they can’t.
There are some methods for folks who have poor credit, which make it easy to obtain a loan. This may also help them improve their credit score. In this article, I explain the best of these methods. Read on if you have bad credit and are looking for a loan.
Peer to peer lending
Credit reports are for creditors to see. Professional lenders want to make sure the borrower can repay the loan. But if you take a loan from one of your peers, then you may not have to face such rigorous scrutiny. Plus, you can have the loan at a low-interest rate. Sometimes as low as 6.5%, far lower than a traditional bank would offer to a person with a low credit score.
In the case of peer to peer lending, a borrower posts a request, 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 credit.
Find a co-signer
Sometimes, people with a good credit history jointly sign a loan with a borrower who has bad credit history. Finding a co-signer might appear to be a daunting task, but it’s not. Ask your friends, acquaintances, relatives and colleagues if they have a good credit history, and if they do, see if they will 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 will go after the co-signer to pay the whole amount. Both are on the hook for the loan and both are responsible for late payments or defaults. So, make sure the person, who’s co-signing, has full trust on you.
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 can ask your family and friends for a loan. Sometimes, people are not willing to co-sign but may agree to lend money directly.
Your friends and family members know you. So, you’d have an easy time earning their trust. Offer to sign a written contract with them. Create a serious contract and loan agreement that details all clauses related to the loan such as the interest rate, the payment terms, the collaterals, etc.
Credit unions may be a good choice for you to look for borrowing opportunities. These organizations are like 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 to 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.
These four tips can help you get a loan even with a low credit score. So, try some of the suggested methods and let us know how it goes.
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.
Thank You, Tina Roth!
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, and visit her blog @ ProFinanceBlog.com