A loan can provide you with the financial help you need to take care of a variety of things, from home improvements to paying off debt and more.
If you’re wondering whether you can get loans with bad credit, the answer might surprise you.
Read on to learn more about how you can obtain a loan, even if your credit is less than stellar.
Know Your Credit Score
The first step in obtaining any type of financing is to know your current credit score.
If it happens to be lower than 550, getting a personal loan can be a challenge.
If your FICO score lands between around 580 and 669, most lenders consider that to be “fair.” It’s not unheard of to get loans with bad credit at this score level, but most lenders will consider you a subprime borrower.
When you have a low score and apply for a loan, your interest rate will most likely be high. That’s because lenders consider you to be at a higher risk of defaulting on your loan than other, high-credit borrowers.
Any score under 600 can make getting approved more challenging. If your score is 450 or less, you may not get approved at all or you could have to put up collateral.
Before you apply for a loan, do your best to get your FICO score to go higher.
The higher your score, the better the approval odds are as well as the better rate you’ll receive. Remember that you can always improve your score and it isn’t permanent as long as you work toward improving it.
Consider a Co-Signer
In some cases, you may need the help of a co-signer to get loans with bad credit.
A co-signer is someone who has good credit and a solid track record when it comes to things like credit cards, mortgages, and personal loans.
If you’re thinking of asking someone to co-sign a loan with you, remember that they will also be responsible if you happen to default or fail to make payments. Ideally, your co-signer should be someone you know and trust, such as a spouse or family member.
Offering to use a co-signer can give your lender peace of mind since they know someone else will make payments if you happen to run into trouble. It’s important to note that not all lenders will accept co-signers, however.
If you end up being late on your loan or go into collections, it can have a negative effect on the other person’s credit, too. Make sure that you are ready, able, and willing to pay your loan on time if you decide to ask someone to co-sign with you.
Getting Secured Loans with Bad Credit
In some cases, a lender will consider approving you as long as you have some kind of collateral to offer.
A secured personal loan means that you are offering up your personal assets to the lender if you default.
These types of loans can be available to people with a credit score of around 550 but they aren’t always an option for all lenders. Remember that if you sign up for a personal collateral loan, you stand to lose quite a lot.
Lenders consider a variety of things collateral, from your vehicle to your jewelry and even your home. If you go into default, you’ve essentially given the lender permission to seize your assets to make up for the lack of payments.
While lenders consider collateral loans lower risk, it’s a higher risk to you. Make sure you proceed with caution before you consider this type of loan and weigh the pros and cons to decide if it’s really worth it.
One benefit to a collateral personal loan is that you may get better interest rates. Just be sure this is something you can commit to you so you don’t run the risk of losing your valuables or your property.
Do Your Research
Whenever you apply for a loan, it puts a “hard pull” on your credit.
These pulls can cause your scores to drop which may backfire if you don’t get approved on the first try.
Before you actually apply for loans with bad credit, shop around to find out what’s available to you. Most lenders will post their rates and terms online so you can easily see the various programs available.
Talk to a financial advisor if you’re not sure how to get a loan with bad credit. They might be able to steer you in the right direction before you commit to an application.
Thanks to the internet, there are plenty of websites online that provide charts so you can do a side-by-side comparison of lenders. It’s always best to research as much as you can before applying so that your credit score doesn’t take a potentially harmful hit.
A Loan Is Within Your Reach
Regardless of why you may need one, loans with bad credit are possible as long as you know where to look.
Make sure you know what your credit score is before you apply and try your best to improve it.
A co-signer or collateral loan is optional, but they’re not always the best choice. Do some research to decide which low-credit loan will work best for your needs and your financial situation.
If you need a loan with quick approval and no credit check, contact us today for more information and we’ll help you get started.