Tips to Get Approval for Bad Credit Loans
Have you recently just had yourself or a family member admitted to the hospital and now have to deal with a large hospital bill? Or do you have a staggering amount of bills piling up that threatens getting your electricity and water cut off?
Financial situations happen and we have to find a way to solve them, and one of the most popular ways to fix them is by getting a loan. However, some people have a poor credit score that might make them think they cannot get a loan.
Thankfully, we have provided a list of tips on how you can get approved for bad credit loans and where you can find them.
Getting Approved for a Bad Credit Loan
Chances are is that when you apply for a traditional loan from a bank or traditional lenders, you will get denied because of your credit score. Your credit score shows how trustworthy you are as a borrow based on your credit history, so a poor one does not impress many lenders.
If you do get approval from them, you will also have high interest rates charged to your total loan amount, which can dig a hole in your pocket in the future. Thankfully, you can opt for some bad credit loans from specialized lenders and financing companies and raise your chances of getting approval, here are a few tips that you can follow.
Get a Loan that is Secured
You will have a higher chance of getting approved for a loan with bad credit if the loan that you are getting is secured. A secured loan basically means that there will be some form of collateral when you get the loan, so the lender will have financial security even if you don’t make your payments.
For instance, if you were to get a car loan, many lenders will make it a title loan (a type of secured loan) as they will have a lien on the car during the life of the loan and can repossess it if you default. Other forms of collateral can be your home or the car that you currently own.
Since the loan is secured, most lenders won’t be too bothered about your credit score. They’d rather see that you can pay them back and know that you will because there could be something to lose for you. The lender will also be assured in the fact that they will be able to profit either way.
Find a Co-signer
If you have a good family friend whom you trust or a relative who has a good credit score, ask them if they will be willing to sign the loan with you. They won’t have to pay for anything as long as you are paying off the payments yourself.
A cosigner is just a person who will be in charge of handling your monthly payments on the off chance that you go default on the loan. A lender will prefer seeing a co signer with a good credit score to make up for yours and they will know that they have a back up if you stop paying.
However, just be sure that you are keeping your responsibilities and paying off the loan to avoid having them pay for it.
Build Your Credit Score
If you have an emergency to deal with that needs to be paid off right away, this might not be a method that you can try. However, if you can wait for some time and put some effort into building your credit score, then you can get better loans and loan terms.
Take your credit reports from some credit agencies to see what your score and credit history is. You should also check out what causes your score to get so low in the first place. This will help you know where to start when you begin rebuilding your credit.
There are many ways to rebuild your credit and to make it more effective you should do multiple methods at once. However keep in mind that none of the methods work in a snap of your fingers, because depending on your credit situation it can take half a year or even three years to get a good credit score.
If you want to start building your credit, eradicate as much debt as possible and clear out your credit card balances.
Additionally payment history is very important when it comes to your credit score, so make sure that you start paying for those bills on time.
Finding a Lender
The next step that you should do is to make sure to know where to look. As we mentioned earlier, you probably won’t have a lot of luck getting a loan from a traditional lender or a bank. So, you will need to make sure that you have other places to go to to look for a loan.
Normally, you can do a quick search online to find bad credit loans around your area. Just be sure to do your research on the company and lender before agreeing. You don’t want to accidentally fall into a scam.