Getting loans for people with bad credit could seem an uphill task but if you apply a little creativity you can get that credit to solve that pressing problem that has given you sleepless nights. Just be ready to meet the repayment terms of providers and you are home and dry.
In this post:
- What is a bad credit loan?
- What is a credit score?
- How do you generate credit scores?
- Know your credit score and understand what it means
- How Bad Credit Scores Affect Credit
- How to improve your credit score
- Where to get loans for people with bad credit
What Is A Bad Credit Loan?
Bad credit loan is another name for a personal loan. It is a loan you must pay back in small instalments to the lender. You apply for these loans for people with bad credit especially to meet their immediate cash needs or pay for transport or utility bills, etc.
You could apply for a loan from your bank. Bank loan interest may be a bit on the high side, so you can consider getting a loan from credit unions, family or friends, get a co-signer, mortgage your home for a loan, online cash loan providers, peer to peer and payday lenders.
The list of places you can get a loan are as many as your imagination can take you. However, what can stop you from getting a loan easily is when your credit score is bad.
Let us find out what credit score is and how to improve it so that you can get personal loan you when you need it.
What Is A Credit Score?
When you think of loans for people with bad credit their credit score is vital.
A credit score is the result financial institutions get from the records of your borrowing history which are put in numbers form. It reflects a comprehensive report of your borrowing, defaults if any and repayment history.
According to Wikipedia “A credit score is a numerical expression based on a level analysis of a person’s credit files, to represent the creditworthiness of an individual. A credit score is primarily based on credit report information typically sourced from credit bureaus”.
Now that we know what credit score is, lets us see who makes it.
How Are Credit Scores Data Generated
Your credit score is generated for your bank from your credit information available to credit bureaus in the country. The major credit bureaus are Equifax, Experian, or Trans Union. They are the ones who work on primary data that create your score.
Depending on the credit report they use each time they make your credit report, your credit score will vary.
You will most likely get a Fair Isaac Corp Score FICO or Vantage score. These agencies process your data and send it to financial institutions and lenders to enable them to reach lending decisions easily based on your credit scores and other parameters.
So it is better you know your score before you apply for a loan. See the range of credit score and the interpretation below:
761-851 is Excellent
699-800 is Good
659-698 is Fair
619-658 is Poor
Please, note that any score under 619 is too poor. So should be eager to improve it before applying for any loan.
Know Your Credit Score and Understand What It Means
The Average credit score in America in 2018 is about 699, while in 2019 a Fair Isaac Corp Score (FICO) is about 695. In sister agency called Vantage, the average credit score is about 673. However, the ranges for both agencies are between 299 to 851.
According to the interpretation of credit scores, the higher your score is, the better for you. A low score for bad credit starts from 649 and below. To get loans for people with bad credit, you must try to score above 650.
How Bad Credit Scores Affect Credit
Having a bad credit score means you are classified as bad news for most lenders. When you apply for a loan your credit score will stand as a barrier to granting you a facility. This is not good. So, for lenders to start looking at you, try and improve your credit score somehow.
Improve Your Credit Score by Doing The Following
If you have a bad credit record or score to improve it, start making payment on your credit exposures to settle debts on your Credit cards. Also, don’t borrow fresh credits from payday loan lenders or other online cash lenders, and do not apply for new loans.
After repaying for some time, you may apply again for personal loans from lenders. If they still turn you down approach your bankers or loan officer for an interview. Doing an in-person interview will help you to convince the lender that they can trust you to repay any loan they grant you.
Make sure you show your lender that you are a stable person who has lived in one house and, worked for one company for a long time. In addition, prove that you have lived in that town for a long time. So you have strong roots to the place you are living.
Before you go for an in-person interview with your bankers, make sure you keep the following things in mind and have the document you can show to him or her.
You should …
- have a comprehensive bank statement for checking and savings account
- You need to have documents for child support or Alimony,
- have at least two years Tax returns, chequebooks or pay stubs,
- make a list of your physical and liquid assets,
- You will also need to make a list of unsecured credit card debts, utility bills and medical bills,
Where You Can Get Loan If You Have Bad Credit.
There are many places to get loans for people with bad credit. Some are listed below. You visit a credit union, family and friends, home equity, get a co-signer, personal instalment lenders, Peer to peer lending and payday loan.
Family and Friends
You can start with the place of least resistance. Start with your family. Meet your rich family members and ask for a loan. It is the easiest out of the lot.
Home equity
You can pledge your home if you have one. Lenders would quickly lend to you money if you can show the title to your home. They will grant loan easily if you create either a legal or equitable mortgage in their favour.
Get Co-Signer
You can approach any bad credit lenders in your city as long as you have a trusted person with you that can cosign with you. This person must have a good credit record, earn a high income and have a good job. Just make sure you get a job so that you do not default on your repayment.
Credit Union
Join a credit union, and confirm that the maximum interest on the loan you want to take is not so high. You can apply after you have joined them and convinced them by your records such as a stable place of work, where you live, work history, the length of time you lived in one city, paying down your credit card loan, among other things we had discussed above etc.
Peer-To-Peer Lending (P2P)
You can go to these lenders to get that unsecured loan if you have a bad credit history. Use online services that bring lenders and borrowers together. and apply for the loan you want.
Meet Personal Installment Lenders
This loan is a short term loan that is not secured and that charge high interest, though their charges are not as high as that of payday lenders. You repay on instalments over a given period of time you agree with the lender.
Payday Loan
You may approach a payday lender if you have no other option to get a loan. It is quick cash but you pay an excessive interest rate on this kind of easy loan. Think twice before you approach them for a loan.
Conclusion
Loans for people with bad credit are hard to get especially if your credit score is very low, but it is not impossible. Analyse why you need a quick loan, and how you can repay the loan you collect, and meet the best lender of your choice to get that loan now.
