It is very hard to get a loan when you have bad credit, but the good news is that it is not impossible to get the loan you want. For this instance, you only have fewer options and loans may get expensive. If you have a bad credit score, it is very easy to fall into some traps; and to avoid getting into these traps, you need to prepare to avoid being vulnerable because of your desperation. But for what it’s worth, you need to borrow more wisely in order to build a much better line of credit so that you can easily borrow on other occasions.
What is a bad credit?
You may have a bad image of your credit which may not even be true. If you are told that your credit has ruined the chances you have of getting a loan, ensure that this information is accurate. You might only have a few bad records on your credit report, but once they are fixed, things may look quite different to your lenders.
Different lenders understand different meanings of the term “bad credit loans.” There are lenders who might turn you away while there are lenders who can lend you money. Always look around for options before making a decision. But when you are looking around, check the right way:
Only submit your applications to banks and other reputable lenders like online lenders and credit unions. If you decide to go for a predatory lender, they will give you the loan you desire without checking your credit score, but you will regret it later.
If you have bad credit, here are a few ways you can try to get bad credit loans.
Make a visit to credit unions
If you have bad credit, credit unions may be more than willing to work with you because they are smaller than banks. There is a better chance that credit unions can look at you without concentrating on your credit score. Credit unions tend to look at how best they can work with you after understanding what you need and how you can repay the loan.
If you tap into a peer to peer lending service, you have a better chance of getting a loan with your bad credit. You will bypass all the tough rules and high fees. Your friends may be sympathetic, but they are also looking at ways of making money and not losing it.
There are a growing number of online lenders who are willing to approve giving a loan to you with your bad credit score. What you need to be cautious of are payday loans which are quite expensive short-term loans, and they are promoted heavily online.
Family and friends
Peer to peer lending services allows you to borrow from strangers. If you have a really bad credit score, you can go to your family and friends for help. Since they know you, they may be willing to give you a chance. When you decide to borrow from your friends and family, ensure that you do it in a way that protects the interests of everyone. Ensure that you formalize the loan on documents and use a third party to give out the loan and process the payments.
In cases where your friends and family are not able to lend you money and you have a decent credit score, they may act as co-signers to help you qualify for a loan.
Use your collateral
If the approval process is causing delays, you can use a collateral as a security to your loan. If you pledge something valuable, your lender will take you seriously because they will know that if worse comes worst, they can sell your collateral and regain their capital.
Even if you have a better chance of getting a loan using collateral, be careful about how you use it. Instead of placing your home as collateral, you can place something else that is of value. If you somehow forego to pay your loan and you have placed your home as collateral, you will be forced to move out of your house, and you will be in a worse situation.
Be cautious when borrowing
When you are desperately looking for bad credit loans, there are lenders who can take advantage of your situation, because they understand that you are faced with limited options. These lenders can decide to charge you high interest rates, making it impossible for you to get out of debt.
There are occasions that you may be dealing with con artists and not real lenders. Avoid going for lending services that ask you to charge steep lending rates before getting your loan.