It takes years to build good credit, but unfortunately it can be ruined in no time at all. You may have fell on hard times, been young and uneducated about how credit works, or maybe gotten in over your head, it happens to the best of us! Either way, sometimes a situation comes up that you may need to try and get a loan with bad credit – thankfully, though it may be costly, t’s not entirely unachievable. Check out these tips for how to get a loan with bad credit.
Generally personal loans typically don’t need collateral (like a house or a car) they are just unsecured loans with a structured installment payment – you repay the amount you borrow, plus interest, over a certain amount of time. However, if you have bad credit your choice of loans may be quite limited and you will pay higher interest rates because of it. So if you do qualify, just be prepared and know that it will be more expensive to repay it.
Know Your Credit Score and What it Means
Lenders always know your credit score, and you always should too! When you are applying for a loan, that score is going to be the final deciding factor on whether you will be approved or not. You can check your credit score for free at Freecreditreport.com or ask your bank if they provide a free credit score. (Just find the FREE sites, a lot of companies, like FICO itself, will make you pay for it!)
Stay Away From PayDay Loan Companies
These might sound like a good idea -especially if you are in a tight spot. But trust me – just don’t. Some of these companies will charge up to 350% interest! It will leave you in a cycle of getting these loans over and over again because it’s nearly impossible to climb your way out of their ridiculous fees.
If You Have Bad Credit, Fix It
Starting off you are going to pay more to get a loan – however, the nice thing is – that loan can help build your credit. Be sure to regularly check your credit score, pay all your bills on time, don’t use all of your credit limit, keep cards open to show you are capable, and pay down your debt. Stay focused, and you should be able to build your credit steadily.
Try a Secured Loan
If you own your vehicle or home, or other assets that hold value, some places will be more likely to give you the loan you need using those things as collateral. Just remember -if you don’t pay, they can claim stake on that property. So make sure it’s a loan you can afford before getting one.
Ask for a Co-Signer
Though I’m not a super fan of co-signing, this may be an only option for some. With a co-signer you get the interest rate that THEIR credit qualifies for. So if you know someone who trusts that you will repay the loan, that has good credit – this could be the way to go. But remember, if you don’t pay – they are responsible. If you get behind, it affects their credit score as well.