Did you know around 42% of Americans have a poor credit score if we’re going by FICO scores? This affects their eligibility in taking out loans from banks and other financial institutions. If they do qualify for a loan, they’re looking at extravagant interest rates.
If you can’t get a loan anywhere, you may have a bad credit score. In the eyes of lenders, you’re a high-risk individual that won’t likely pay. What if you have an immediate need for a loan?
Not to worry, you still have options. Keep on reading for some tips on how to get a loan and where to get one.
1. Review Your Credit Score
Reviewing your credit score will let you know how bad your standing is. Get a free credit report from the three major credit bureaus: TransUnion, Equifax, and Experian. You’re entitled to one free report from each bureau once a year.
This is also a good chance to look for any inaccuracies in your credit report. Did you know that 1 in 5 consumers had an error in their credit report that the CRA corrected?
There’s a good chance your report might also have an inaccuracy that increases your credit risk. Look through your report with an eagle eye and report anything amiss at once.
On top of that, look for anything you can pay off right now, such as utility bills that went into collections.
2. Pay Collection Accounts
If you have debts that went into collections, consider paying them off now. It can make an immediate difference in your credit score.
It might be able to recover your score enough to decrease your credit risk tier. You might then be able to qualify for better loans.
To see how it would make a difference, use a credit score simulator.
3. Build Your Credit
If you still have some time before you need a loan, consider doing other things to build your credit first. Having a better credit will qualify you for a loan with better interest rates and terms.
Start with making on-time payments for your utility bills, credit card debt, current loans, and so on. You can set up automatic billings and payments to ensure you don’t miss the due date again.
You can also add positive accounts to your credit to boost your score. If you haven’t added your cellphone and some other utility bills yet and you have a good payment history with these bills, add them to your credit account right away. Once they’re calculated into your credit score, you might get enough boost to improve your score.
4. Get a Cosigner
A cosigner boosts your credibility in the eyes of banks because it acts as another layer of security. It lessens your risk because the cosigner will take over the payments if you become unable to do so.
Get someone you trust and someone who trusts you to cosign your loan. Make sure that whoever it is, he/she understands that they will be liable for your payments.
5. Get a Secured Loan
Secured loans are a great option for people with bad credit because lenders won’t take too much of a risk when lending money to you. In this type of loan, you must have a collateral to offer, like a car or a house. For this reason, your credit score isn’t much of an issue.
You have to make sure you pay on-time, though. Making on-time payments can boost your credit score and once you’ve paid off the loan, you’ll be in a better position than before.
6. Consider a Credit Union
You can often take out a loan with bad credit from credit unions.
Credit unions act like banks, but they don’t assess your loan application based on your credit score alone. They also look at other factors like your job, where you live, and even your education.
They’re more flexible in their terms, and they don’t charge high interest rates. The catch is that you have to be a member first.
You might also find a credit union in your company. This can be an easier route since your payments will come from your paycheck itself. They have a guarantee that they’ll get payments as long as you work with the company.
7. Consider a Home Equity Loan
If your home has equity, you may be able to use that equity. The good thing about this is that your credit score doesn’t matter. Home equity loans also have fixed repayment plans and interest rates.
The downside is that you’re also putting your home as collateral. If you fail to make payments, you might lose your home.
8. Look for Online Lenders
If you can’t get a loan with poor credit from banks, online lenders are a possible choice. Many consider working with people with bad credit, and they’re more flexible with their terms.
Some websites connect you to multiple lenders, so you can compare offers side-by-side. Income based loans care less about your credit score and more about your capacity to pay it back.
These options do have high-interest rates, but if they’re the only option, they’re as good as any.
9. Consider Payday Loans as a Last Resort
A payday loan can provide cash within 24 hours, and as its name implies, you pay it off come payday. Some loans you can pay off in a few months, but for the most part, it’s a short-term loan only.
However, payday loans charge absurd interest rates because they’re not regulated by the law. If you’re not careful, you may get trapped into a cycle of debt.
If you can’t get a loan anywhere else, that’s the time you may consider getting a payday loan. If it’s a true emergency and you’ll be able to get the money in a few weeks, a payday loan is better than having no money at all.
Consider Your Other Options if You Can’t Get a Loan Anywhere
Getting a loan with bad credit isn’t impossible; you only have to work harder in looking for your options. If you can’t get a loan anywhere, consider our tips above and you’ll be sure to get a loan in no time.
For more financial tips, feel free to go through our other posts today. You might discover a crucial guide to help you get out of debt or secure a needed loan!