What if bad credit never stops you from getting the loans you need?
Many people worry that a poor credit score is a “kiss of death” when it comes to getting a new loan. Fortunately, there are several ways to get loans with poor credit, and you can get started today.
Wondering what these methods are? Keep reading to discover the answer!
What Is “Bad Credit?”
We’ve put together a solid guide for how to get a loan with bad credit. First, though, it’s important that we define exactly what “bad credit” is.
Generally speaking, any credit score below 580 is considered poor. The lower it is, the worse the score (down to a minimum score of 300).
And a score north of 580 isn’t necessarily good. Until you hit about 669 or so, your credit would still be considered “fair” instead of good.
Different lenders have different requirements. It’s possible that a “fair” credit score would be approved one place but denied at another.
“Bad” credit scores typically keep you from getting a traditional personal loan. However, the alternatives below can help someone with any credit score make progress towards their goals.
1. Cosigner
Our first solution is nice and simple. If your credit is bad on its own, then you may want to seek out a cosigner.
When someone cosigns a loan with you, they are equally responsible for making sure the loan is paid back. However, the lender will also look at their credit as a way of determining whether to approve the loan.
This is a great option for couples with mismatched credit, especially when you are making a mutual purchase. And it also works well for young borrowers who may be able to get their parents to cosign.
2. Secured Loan
The reason that lenders rely on credit is that they usually have no other indicators of your ability to pay a loan back. However, this is not the case when it comes to secured loans.
A secured loan involves putting up some of your property to get the loan approval. If you fail to pay the loan back, the lender then takes possession of whatever property you used.
One common option for such loans is to a car to secure the payment. Just make sure to pay everything back on time or you will be at risk of losing your wheels!
3. Home Equity Loan
If you own a home, there may be an alternative to using a traditional secured loan. Instead, you may wish to use a home equity loan.
As the name implies, these loans rely on the equity you have built up by making home payments over the years. The original intention of such loans was for you to improve your home, though you are not limited to that purpose.
These loans are attractive for their low-interest rates, and you can pay the loan back over three decades. Like a secured loan, though, keep in mind the lender gets your house if you fail to pay them back.
4. Personal Installment Lenders
Most of our guide has focused on getting secured loans or unsecured loans. However, one of the best kinds of bad credit loans is the personal installment loan.
Such loans are designed with the understanding that emergencies can come up. Accordingly, the lender looks at other factors besides just your credit score before making their decision.
This is a good reminder that there are many fine online lenders available, so you can get a loan approval without leaving the house. If you’ve never checked these lenders out, Bonsai Finance is a great place to start!
Understanding Alternatives
For better or for worse, there are plenty of ways to borrow money when you need it. And some of these ways are better than others.
Some people prefer to use payday lenders. And payday loans have several advantages, including instant approval and very fast payout.
However, such loans must be paid back within a small window, typically 30 days. And the loan carries a very high amount of interest with it.
While such a loan is great for short-term needs, it makes a poor choice for long-term needs.
Understanding Your Credit Score
We have talked a lot about how to get a loan with bad credit. But do you have a good way to know what your credit is?
Many services now allow you to monitor your credit score each month for free. And if you have credit cards, some of the card companies even provide free credit monitoring as part of their services.
Doing this each month helps you to monitor whether there have been any changes to your account. More importantly, it also gives you a way to start fixing your credit so that “bad credit” is a thing of the past.
Fixing Your Credit Score
One thing to monitor is your credit utilization. This looks at how much credit is available to you and how much of it you are actually using.
Lower utilization is better. So, concentrate on paying extra off on certain cards, especially those with higher interest.
Keep cards open after you pay them off or stop using them. Having a good credit “age” is another way to improve credit.
If you have anything in a collections status, try to pay it off. They may be willing to remove this from your credit history, and certain lenders may not carry about accounts that went to collection status so long as they are paid.
Dispute When Needed
The final reason to monitor your credit account is the most important. Don’t be afraid to dispute incorrect information!
Sometimes, a company may not correctly report the debt you have paid off. Or they may have fraudulent charges on your account from someone else.
Dispute anything that is false and watch your score rise!
The Bottom Line
Now you know how to get loans with bad credit. But do you know where else to get the news you can use?
Keep checking back for the latest news and tips!
