We’ve all been in the situation where we need money, and often it’s not that easy. Sometimes, we need to get a loan – but as our financial lives are now dominated by our credit score, those with bad credit can often be subject to fewer opportunities out there for a loan! Well, CreditNinja.com have come up with this fantastic step-by-step guide to getting a loan if you have bad credit. So, never fear! Let’s dive right in and find out!
Step One: Check Your Credit Report
You can’t possibly know your credit situation unless you’ve looked at your credit report and understood what is happening. If you know your credit score, even if it’s bad, you might be able to understand your chances of getting a loan a little better. Some lenders might have a minimum accepted score for prospective borrowers, and that can sometimes be lower than you think!
Knowing what has affected your credit score is crucial too. If you’ve got bad credit due to an error on your report for example, you should get that rectified immediately before applying for any loans. If your credit score has been negatively affected because of missed payments, you should look at that situation and consider your options before getting a loan. Having said that though, a loan for debt consolidation might positively affect your credit score – so, whatever the situation, it’s a good start by checking your credit report and then getting someone to advise you on your possible options!
Step Two: Lender Comparisons
It’s a very good idea after you’ve checked your credit report to try and compare potential lenders. See what they’re looking for in terms of credit score or employment status etc.
Some lenders might specifically tailor to people with bad credit, so if you manage to find a few out there that seem reputable, it can be helpful to research their offers and understand what the potential terms of the loan might be. No two lenders will be the same for their terms and conditions, so getting a good knowledge of the lender can be key to success with getting a loan with poor credit.
Step Three: Use Pre-qualification Tools
Many lenders like banks will have a pre-qualification tool which allows you to see your chances of approval before you go ahead and take a hit on your credit score. Lenders who accept people with bad credit might look at other factors when it comes to accepting a prospective loan application.
Pre qualification tools are very handy to people with bad credit as you can fully get to grips with what lenders are looking for with potential borrowers. It’s important to know that you certainly have the possibility to get a loan with bad credit, it’s just about getting the right knowledge before you go out there and start applying formally!
Step Four: Collateral Can Help
Many lenders will allow someone access to a loan, credit card or other form of credit if they have bad credit, but they require something or somebody to guarantee the repayments. If you manage to get a co-signatory, your chances of getting a loan are hugely increased.
Lenders and co-signatories understand that if you default on your payments, they are now held liable – so before they accept this and sign on your behalf, it’s normally a long thought out process. Another form of collateral is secured loans.
A secured loan is a loan that is secured against something, which is often your home. If you’re a homeowner, you can sometimes get a loan using your property as collateral. This means that if you default on your repayments and cannot source a solution to your financial problems, the lender can repossess your home. So, before taking out a secured loan – seriously consider the implications if you default.
Step Five: Prepare For The Application Process
If you’ve done your research on your credit score, lenders and your personal circumstances – the next step is to formally apply. If you’ve discovered a lender that tailors loans specifically to those with bad credit, you might read that they require certain documentation for you to formally apply, including pay stubs or identification documents. Always get these things ready before you start the application process, because any delay can cause problems and potentially a hit on your credit score if you have to apply again!
Remember though, if you’ve found a lender that doesn’t look genuine or has little to no reviews or history – they may not be genuine! If it looks too good to be true, it probably is. Never give your personal and financial information out without fully understanding who it is going to. Fraudulent activity is on the rise and people who are more desperate for loans or money in general can be easy targets, so be cautious if you’ve found a lender online.
What Else Should I Know?
People with poorer credit generally have a bad mark on their credit report which could be a result of missed payments or defaults on credit agreements – it could even be for something more serious like previous bankruptcy.
These marks negatively affect your chances of getting a line of credit because potential lenders aren’t convinced that you’ll make the repayments – hence why having collateral can often be the only way to get a loan if you have bad credit, as the lender has something there that they can recover.
You might want to consider increasing your credit score before applying for a loan – you’ll increase your chances of acceptance, along with increasing the number of potential lenders and increasing the chances of having a better interest rate.
You can increase your credit score by doing the following:
- Frequently check your credit reports
- Check all credit bureau reports
- Repay any debts or agree to repayment plans
- Fix any errors on your credit report
- Consider taking out a credit builder credit card
- Consider a debt consolidation loan
All of your credit options will be subject to your own personal circumstances and lender terms. Good luck!
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