If you are struggling to get a loan since you are in debt or have bad credit, you should click here to learn how to still get a loan with bad credit.
Did you know the average FICO credit score in the US nationwide is at 704? About the majority of the population carries that credit score.
Meanwhile, 11.5% of the population would have scores below 549. This would lead towards a difficult time with loan approvals as well as having higher interest rates.
What happens if you fall in the same circle?
Having bad credit scores leads to limited options with financing. Making it seem impossible to have a loan approved. But it is still possible, despite its difficulty.
If you can’t get a loan anywhere because of a bad credit score, consider looking into these options and actions.
1. Check Your Credit Reports and Scores
If you can’t get a loan anywhere, you need to find out about where you stand. Start by checking your credit reports. The information contained in these reports were the basis for the calculation of your credit score.
Make sure there are no errors in the credit report. Did you notice that there were false-negative marks in your credit report?
If you did, contact any of the three credit bureaus that generated and issued the report. Have the information ready for the dispute and have the error removed.
You also need to know your credit score. This can affect your chances in approval odds for loans and what you qualify for.
2. Improve Your Credit Standing
You now have the information you need and where you stand with your credit score. This time, you need to take action in improving your standing.
Your credit score takes into account a plethora of factors. You can focus on the ones that impact your credit standing by a huge degree. But consider opting for a holistic approach to improving your credit standing instead.
Here are some of the factors that affect your credit standing.
Credit Usage
For this factor, keeping the amount of your debt low can provide an improvement to your credit standing. Aim for keeping the debt amount below 30% of your total credit limit. Otherwise, maxing out your credit could pose problems.
Payment History
Your payment history can also affect your credit standing. You cannot change your past payment records. But you can still make a proactive approach in improving it.
You can do this by making your current payments on time, even if it is at the minimum amount.
Length of Credit History
If you kept your old account open instead of closing it after paying it off, it can help bolster your credit standing. This way, you lengthen your credit history.
Recent Credit
If you open or apply for several new credit accounts within a short time span, it would make you appear as risky to lenders. This can affect your credit standing in a negative manner. Instead, open new accounts only when necessary.
The trick here is being responsible for handling your credit account.
3. Weigh Your Lender Options
You also need to know your options after seeing your situation with your credit standing. After taking efforts in improving the credit score, you need to scout for the best loan that would fit you.
Look through different lenders as they would have different interest rates and loan terms. By assessing your creditworthiness and the risks involved, the lenders would assess you with their methods to determine the interest rate they would give you.
Rather than going with the first option available, keep looking around and find the ones that would work well for you.
4. Avoid Certain Loans
In looking for loans that you can apply for, there are loan types you should avoid. Among these loans include payday loans and auto title loans.
These loans tend to have short loan terms. They also have steep interest rates as high as 350%, and high fees.
They provide quick cash when needed by people with bad credit. However, these loans tend to be rather predatory.
As much as possible, avoid these loans.
5. Consider These Loans and Options Instead
Instead, go for other loans, especially when pressed during emergencies. There are a variety of loans you can pick. These loans would even help you in building your credit and may provide better options.
The following are some options you can take. They offer flexible requirements and affordable interest rates.
Credit Unions
One option you can try is by joining a credit union. Great for borrowers with bad credit as it provides them an option for lending.
When applying for a loan, the credit union operates as a bank. Though when evaluating you, they don’t only base it on your credit score. They base it on other factors as well like your address, work environment, and so on.
Family or Friends
The advantage of having family or friends to borrow from is in the ease of accessibility. This allows for lower interest rates and terms. This hinges around trust and accountability so you need to negotiate the terms here.
Having a Co-Signer
In applying for loans, having a co-signer can help your case. The interest rate of the loan factors the co-signer’s credit rating.
While this can help you, be careful not to fall behind with the payments. Due to them being responsible with the loan along with you, falling behind could also affect them.
Personal Installment Lenders
For emergencies, a personal installment loan can help in covering expenses or for debt consolidation. During application, they also consider other factors aside from your credit score. This provides for better approval chances.
Home Equity Line
You can also consider going for this type of loan as well. The setup is that you offer an asset as collateral, making lenders more likely to approve a loan. This will have the collateral cover the losses in case you don’t get to repay the loan.
When choosing this kind of loan, avoid the ones with short loan terms with high-interest rates. It is not worth the risk of losing your assets as collateral.
Can’t Get a Loan Anywhere? Try These Options Today!
With bad credit, it would look like you can’t get a loan anywhere. The reduced amount of options available for you could prove difficult but it would still be possible to get money in case of emergencies. Also, you can still turn the situation around by improving your credit standing.
It will need some research and hard work.
Why stop here when we have other guides and tips that you can check out today. Discover new tips and tricks to maintain your financial advantage.