Getting a loan involves a lot of paperwork and financial history checks. Lending companies will check many things, including your employment status, credit score, and payment history.
All these determine whether you’re capable of paying back the amount on time. If you have a bad credit history, you might not qualify for a loan. If you get, they’ll expose you to higher interest rates.
But the good news is that you can still get a loan with bad credit. Here are some of the ways to get a bad credit loan.
Check Different Loan Types that You Qualify For
There are two types of loans you’re likely to get with a bad credit report.
- Unsecured loans such as personal loans. You can use these loans to finance emergency expenses or refinance high-interest rate loans. But bad credit personal loans attract a very high-interest rate and can be hard to obtain.
- Secured loans: To get this, you must have collateral. The loans offer lower interest rates because the lenders have security/ collateral. The lender can repossess the property you used as collateral if you don’t pay the loan amount plus accrued interest on time. This type of loan is easy to qualify for, even with a bad credit score.
Know the Type of Loans to Avoid
Just because you have a bad credit score doesn’t mean you run to apply for every loan that lenders are willing to give you. Borrowing responsibly is an excellent way to improve your credit history.
No matter how urgent you need the money, avoid high-interest payday loans and auto title loans. These loans are short-term and attract very high-interest rates. They’re more likely to put you at a greater financial risk.
Opt for Online Lenders
Many financial institutions will be willing to give you a loan with your bad credit. Online lenders can take the risk of working with borrowers with credit as low as 550 FICO score.
Check online sites that allow you to compare multiple lenders. Online lenders will not pay much attention to your credit score but your capability of paying back. But you must understand that they have stringent lending standards.
Work on Improving Your Credit Score
Getting a bad credit loan can be quite hard. But if you manage to get one, take it as a chance to improve your credit score. One way to improve your credit history is to pay on time.
To ensure you never miss your loan payments, consider turning on automatic billing. Improving your credit score is a step by step process but possible with consistency. Make sure you’re always in a better position the next time you make a loan application.
The Bottom Line
Getting a bad credit loan is possible but involves a lot of work. You need to work on getting yourself out of the situation and qualifying for better loans. Be familiar with your credit score and reports to protect your financial health.