Having bad credit or a poor credit score isn’t uncommon, so relax let’s take you through how to get a loan even with bad credit.
There is usually a time in the life of a business or an individual where monies are urgently required to take care of an emergency, grab an opportunity, or even expand, and in such times, loans might seem the only solution.
The major challenge with accessing a loan is usually either ‘Bad Credit’ or “No Credit’ and almost everyone wants to know how to get a loan with bad credit.
Fortunately, there are methods to employ that will improve your credit score, make credit affordable and give you healthy credit history.
Credit history is the trial record of how well credit is used and repaid.
Just as a good credit history makes it easier to get loans at good rates, bad credit history on the other hand makes it difficult.
So how exactly do you get a loan with bad credit?
What Is A Bad Credit Loan?
A bad credit loan is the short-term financial relief granted to a person or company with poor financial history where the person or company is in a poor financial situation and fails to pay bills on time and the high possibility that it may repeat in the future.
Companies with bad credit are most affected, it is often time reflected in a low credit score
A company or individual with bad credit will find it difficult to get a loan as it will be with a high-interest rate because companies and individuals with bad credit are considered riskier than others
What Makes Up A Bad Credit Score?
- Payment history: 35%
- Amounts owed:30%
- Length of credit history: 15%
- New credit:10%
- Credit mix: 10%
FICO® Credit Range
- Poor: 579 and lower
- Fair: 580–669
- Good: 670–739
- Very good: 740–799
- Exceptional: 800+
Types Of Loans
Let’s have a brief rundown of a few loan types you might want to know
1. Secured Loans
Secured loans require that you offer something valuable like a home, land, or car as collateral.
Secured loans have more favorable rates and terms and higher loan limits because you have a greater interest to pay your loan back.
2. Unsecured Loans
Unlike secured loans, this one does not require any collateral, and the interest rate is based on your creditworthiness which may be a little difficult to be qualified for if your credit score isn’t above average
3. Cash Advances
A cash advance loan is a short-term loan offered mostly by your credit card issuer against a salary or card reimbursement.
The loan is usually received in cash and is borrowed from the available balance on your credit card.
4. Payday loans
Payday loans are short-term loans usually for $500 and less with a very high fee charge in exchange for fast cash, and repayment is usually due on the next paycheck.
5. Student Loans
6. Bank Agreements
7. Home Equity Loans
8. Credit-Builder Loans
A credit-builder loan is designed for those with little or no credit history to build their credit history thereby improving their creditworthiness to access loans with good interest rates easily.
This type of loan most time does not require a credit check they only require you to have enough income to make payments.
How To Get Loan With Bad Credit
1. Check Your Credit Score
Before starting the process of getting a loan, check your credit score. You are entitled to get an annual credit report for free, you can as well purchase from a credit bureau or get it for free from some financial institutions.
You can currently access weekly reports from AnnualCreditReport.com. but your credit report won’t include your credit score
2. Choose a suitable loan company
There’s obviously no single best loan company for everyone. The best bad credit loan company for you can be the most suitable for another.
3. Ensure that you can repay the loan
It is one thing to get a loan and it is another to repay it. Before getting committed to a loan ensure you evaluate your home expenditures to make sure that you can afford additional monthly loan payments.
4. Get Set For A Hard Credit Check
A bank, service provider, or a prospective lender is most likely to run a credit check to check your financial history if you’re applying for a loan.
It grants access to information about your existing and past credit, payment habits, and the types of loans you have so it can assess your risk level as a borrower.
5. Proper Financial Documents Filing
When applying for a loan, you’ll likely have to provide financial documents that include pay stubs, tax documents, and employment information.
6. Try Secured Loans
Most banks, service providers, and lenders offer secured personal loans more easily. Secured loans are usually backed up by a tantamount asset like your home or car.
Secured loans are often easier to get if you have below-average credit.
7. Add A Co-signer If Available
Adding a co-signer who shares in the loan responsibility and may be required to repay it if you fall behind on payments will increase your chance of qualification and may lower interest rates.
Note that not all lenders allow co-signers, so you will need to research to find one that does.
We understand how frustrating it can be when you require money for something important, be it emergency, leisure, or expansion only to realize you can not have it.
In a bit to help with this kind of situation, we have come up in this post with some help on how to get loans with bad credit.
We trust it was helpful. kindly drop a comment in our comment box if you have any.