Having bad credit sure is a disadvantage when applying for a loan, but that does not mean you cannot get approved for one.
People with good credit scores often have a higher chance of getting approved for loans, at more competitive terms, and with lower interest rates. Unfortunately, for those with less than stellar credit scores, getting approved for a loan might be a little tricky. Nevertheless, it is not impossible.
There are things you can do to improve your chances of getting a loan despite having bad credit. Here’s how!
Consider Getting a Secured Loan
Lenders view consumers with bad credit as default risk. As such, they do not easily grant loans to these consumers. Secured loans such as an I.E., mortgages, home equity loans, auto loans, etc. all require the borrower to present a collateral. In the event that a person cannot pay off a loan, the collateral can act as a repayment of that loan.
To get approved for a loan, borrowers with bad credit could offer specific properties as collateral. Collateral will improve your chances of getting approved for a loan if ever you have difficulty getting one.
You can put up your house, car, watch, or any property you may have against the amount of the secured loan. The only catch is that if you fail to repay your debt, you run the risk of losing your collateral. The lending institution will use it as payment for your defaulted loan.
Explore Online Lending Platforms
Some lenders offer loans specifically for bad credit holders. These are called ‘bad credit loans.’
These bad credit loans from direct lenders are relief options for consumers with less healthy credit scores. These loans are treated as personal loans where bad credit consumers can borrow money and pay it back in fixed monthly instalments.
However, as a caveat, these types of loans often come with high-interest rates since they cater to a higher risk applicant.
Find a Co-Signatory to a Loan
Bringing in a cosigner for a loan adds strength and credibility to your application, more so if your cosigner has a good borrowing reputation.
Lenders view cosigners as an extra layer of security in cases where the principal borrower is unable to make payments. It gives lenders peace of mind and confidence in granting loans to bad credit holders since the former can pursue whatever legal remedies he may have against both the principal and the cosigner.
Borrow From Families and Friends
If you have difficulty getting approved loans from banks or financial institutions, perhaps, your family and friends can help you. Because of close ties, you are likely to get help from these people, especially when they are capable of providing you with the sum.
As a precaution, though, create a written agreement that indicates the interest rate, payment terms, and any collateral you put up to avoid future misunderstandings. Nevertheless, a family loan should be taken as a last resort. You do not want to risk having a sour relationship with a family member over a bad debt.
Having bad credit can be a pain, but it helps to know that having one does not close all doors to borrowing options. It is still possible to get a loan even with bad credit. You only have to explore options. It may be a little tough, but it’s not impossible!