Some time back it was very difficult or even not possible to get a loan with bad credit, but today the finance market is full of opportunities with various lending options that enable borrowers to get a quick loan despite low credit score.
What is a Bad Credit Score?
Bad credit can be explained as a credit rating that disqualifies a borrower to avail of a loan. There may be various factors that are responsible for lowering your credit score. The main cause for a low credit score is failing to pay bills and loan repayment on the due date.
Poor credit can be easily understood with FICO credit score. If it is under 620, then you are declared as a low credit scorer. Most of the lenders use the FICO score as a qualifying factor for lending. So, with less than perfect credit ratings, it is harder to get a loan with bad credit or obtain a credit card.
How to get a loan with bad credit ratings?
If you are tagged with a ‘Bad Credit’ and looking for a personal loan but don’t wish to pay high-interest rates, then you can think of the five following helpful ways:
1. Borrow money from family or friends
If you have poor credit ratings, then your primary choice for borrowing money should be your family members and friends. A survey reveals that about 70% of people borrow money from their family members or friends during a financial emergency. But, to avail, a loan from your family or friends creates an uncomfortable situation for both sides.
So, to borrow money easily from your family or friend, you need to treat it as a business deal. Prepare a written agreement describing loan amount, rate of interest, repayment duration, and mutually signed by both lender and borrower.
Furthermore, to avoid any kind of confusion between both sides, a clause mentioning “loan repayment failure and its consequences” should be incorporated in the promising document.
To maintain good family and friendly relationship after borrowing money, make timely repayment according to the agreement. This way it will not only help you to get a loan with bad credit easily but, also keep your relationship intact.
2. Look for an acquainted co-signer
If you fail to get money from your family and friends, then the second option is to look for a co-signer.
A co-signer is a person who has a good credit score and well acquainted with you would be willing to co-sign a loan with you. You should consider your co-signer as a helping hand because you will be getting a loan with his help.
So, keep in mind that if you don’t make timely repayments, it will affect the credit score of co-signer also; furthermore, your loan repayment failure will make liable your co-signer for full repayment which is very distressing for him.
3. Get help from credit unions
If the aforementioned two methods didn’t help you to borrow money, then credit union is the third option available for you. A credit union is a type of financial cooperative that provides traditional banking services at low fees.
Credit unions are similar to banks but are formed, owned, and controlled by their members. The working model of a credit union is to help its members by providing credit and other financial services at very competitive rates.
If you wish to apply for a loan with the help of the credit union, then visit www.mycreditunion.gov and www.bankrate.com to find more details. To avail the services of credit unions, you need to join them.
Once you have joined a credit union, you are required to contact them to apply for an online loan with poor credit score.
Before proceeding to get a Loan with bad credit, do compare charges from different lending institutions to get the lowest interest rates.
4. Get a home equity line of credit
Being a homeowner makes it easy for you to apply for a bad credit loan. So, if you are a homeowner and have sufficient equity, then it will be a very easy and less expensive way to get a personal loan despite your low credit score.
To secure a loan, lenders prefer to pledge collateral when they process the loan.
So, if you own a home and have a regular source of income, then it is an easy way to avail of online loans with a low credit score.
5. Apply with Online lenders
If you are unable to get a loan with traditional lending institutions, then online lending or peer to peer (P2P) platforms are the best places to get a loan with bad credit.
In recent time such kind of lending options has become the biggest opportunity for people with poor credit ratings.
Many websites claim to provide quick loans despite the bad credit. You can easily get a lending quote without any charges by registering with them. Borrowing with such lending services cost a slightly higher interest rate.
Hope, the above-mentioned methods, will help you to borrow money with less than perfect credit score.