Emergencies requiring cash tend to happen at the most inconvenient time – right after you’ve rebuilt savings for a previous emergency or at a time of year when spending tends to drift upwards, like back-to-school time, summer vacations, and the holidays. While there’s no stopping those pesky situations that pop up, getting a personal loan can help buy new tires or replace your broken fridge.
Getting personal loans for bad credit is possible, but before you do it, you can do a few things to help you improve your chances of being approved.
1. Check Your Credit Report
Every American is entitled to free weekly credit reports through AnnualCreditReport.com. If you’re not checking this already, you should so that you can find potential errors or red flags. Human data entry errors are unfortunately common on credit reports, so look for things that can be easily fixed. It may take time, but removing incorrect information will ultimately boost your credit score. Second, look for items that can be easily fixed. Is there a small debt that you can write a check for and pay off today? Did you miss a payment last month? If so, pay that now so you are up to date on your bills.
2. Add Up All of your income
When you apply for a loan, lenders ask for your income to determine how much they’ll lend you. They need to know your income so they don’t loan you too much, thus making it harder for you to repay the loan. However, your income isn’t limited to the amount on your paycheck. You can also include non-employee income like child support and Social Security payments, alimony, or retirement income. The higher your monthly income is, the more likely you are to be approved for a loan of any amount.
3. Get a Cosigner Who Has Excellent Credit
Find a relative or friend who has good credit to be your cosigner. This needs to be someone who trusts you since they will be on the hook for your debt. However, if they’re willing to “lend” you their good credit, it could help you get the loans and maybe even a higher amount or lower interest rate. Alternatively, you could ask to be made an authorized user on someone else’s account, like a credit card. This is helpful because some of their good credit history passes on to you once you’re added. They will need your Social Security number and, ideally, not give you an extra credit card or access to the account.
4. Ask for a Small Loan
Only ask for what you need once you’re ready to apply for a loan. Lenders generally like to start with smaller amounts since it’s less risky for them. Once they see that you pay the loan back on time and in full, they will likely lend to you another time, possibly for a more significant amount.
Take Action Today!
Even if you don’t need a bad credit loan today, take some time to work through these action steps now. If you are suffering from bad credit, being added as an authorized user or taking a small loan and repaying it quickly can significantly impact your credit report and credit score. Ultimately, this will make it easier to be approved for bad credit loans.
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