How to Get a Loan With Bad Credit
There are a lot of reasons a person may find themselves with a credit score that is lower than they would like. Sometimes we get behind on bills, lose a job, or have large medical bills. This may present a problem if we need to get a loan for a new car, home improvement project, or to consolidate debt. Fortunately, there are ways to get back on track, including loans for those with bad credit.
Why Is My Credit Score Important?
When you apply for a loan, the lender generally needs an unbiased way to determine the risk associated with loaning you money. Your credit score gives them a glimpse into your payment history and reliability. A low credit score indicates a bigger risk for them, so they may turn you down or assign you a higher interest rate. Although having a good credit score can be beneficial, a low one doesn’t necessarily mean you won’t qualify for a personal loan.
Is a Loan a Bad Idea If I Have a Low Credit Score?
Truthfully, whether or not a loan is a good or bad idea depends entirely on your individual circumstances. If getting a loan means putting yourself further into debt without providing a way to improve your financial situation, or take care of basic needs temporarily, then it is probably not a good idea.
However, loans for people with bad credit are available if you know where to look. And if it enables you to improve your situation, then a loan may be a good thing. For example, if you are struggling to make your monthly bill payments, a debt consolidation loan might help make things more manageable. Or if you are temporarily unemployed, a personal loan can help you with living expenses until you get back on your feet. And of course, if you need to make an important purchase, like a car, it is helpful to know how to get a loan with bad credit.
How to Get a Loan With Bad Credit
There are loans for those with bad credit from all kinds of lenders, but it is important to do your research so you can avoid getting stuck with extra fees or unreasonable payback deadlines. A way to get a loan with bad credit is by using a trusted and unbiased third party like PersonalLoans.com to connect you with a lender. PersonalLoans.com works with many lending companies and can help you find an option that can work for you. We do not guarantee loan approval from our lending partners, but we are confident that we can connect you with an offer that can work for you.
Tips & Tricks to Improve Credit and Get Approved
The most important thing to remember is that you are not stuck with a bad credit score forever. There are ways to improve your score over time and improve your chances of getting approved for a loan now and in the future, even with less than perfect credit. Check out the tips below to start raising your credit score.
Create a Budget
The first step in any financial plan is to write down all of your expenses and their respective due dates. Calculate your monthly income and decide which bills will be paid with each paycheck during the month. See if you can negotiate lower rates for any of your bills and if there are unnecessary expenditures that can be cut out altogether. Finally, compare your expenses with your income and see how they line up. Anything extra should be set aside in a savings account or used to pay down debt.
Know Your Credit Score
The next step is to find out what your credit score is. You can request one free credit report per year from each of the three credit reporting agencies - Experian, Equifax, and TransUnion. You can also ask your bank to let you know what your credit score is—many offer this service free to account holders. When you need a loan with bad credit, knowing your score in advance can help you estimate payments before applying, which will help give you an idea of how it will fit into your budget. You can also see the outstanding debts that are negatively impacting your credit score. If there is an error, you can dispute it with the credit reporting agencies and you may be able to get it removed.
Build Your Credit Score
It can take time to build up your credit score, but consistent effort will bring results. In addition to disputing errors on your credit report, there are things you can do to make improvements over time.
- Consistently pay your bills on time. After a few months your score will start to go up, so set a reminder or sign up for autopay to make sure you don’t miss a due date.
- Pay down your debt. Whenever possible, pay extra on your current debts. One popular way to do this is with the snowball method. Start with the bill that has the smallest total balance and put any extra income onto that debt. Once it is paid off, take the amount you were paying toward that bill and add it to the next smallest until that is paid off, and so on.
- Lower the ratio of credit card debt. What you owe on your credit cards should be less than 30% of the total available limit. The best way is to try to pay off some of what you owe, but if absolutely necessary, try asking your credit card companies to raise the limit. Only do this if you are 100% certain you won’t continue spending with this card, or a higher limit could be dangerous and exacerbate the problem rather than help it.
- Don’t close credit cards after you pay them off. This may seem counterintuitive at first, but having a credit card with nothing on it increases that ratio of unused credit mentioned above. Plus, you have a longer history of good payments with that company, which is better than opening a new card with no previous payments.
- Consider consolidation. A consolidation loan can be a great asset because it enables you to roll all your debt into one easy, and often lower, payment. If you can qualify for a loan that makes sense for you and makes it possible for you to pay more than the minimum amount due each month, you will be able to pay off your debt much more quickly.
Do NOT Get a Payday Loan
Payday loans tend to be marketed as loans for people with bad credit, but it is wise to avoid these types of loans. The short payback window and the high rates and fees are more likely to put you further behind on payments rather than help you get caught up. Payday loans are often referred to as “predatory loans” because they are designed to be difficult to pay off.
Work With a Lender Who Offers Personal Installment Loans
PersonalLoans.com is a great place to go for personal installment loans because we can potentially connect you with a lender with an offer that can work for you. We simply take some basic information from you and pass it along to our lending partners, who then decide if they want to offer you a loan. You may have better luck acquiring a loan through one of our lenders because they use more factors than just your credit score to make a decision. Once you have received and accepted an offer, you will complete the loan process with the lender. You can typically get the money deposited into your account as soon as the next business day after the loan agreement is complete.