Even if you have a bad credit score, it doesn’t mean that you can’t get a personal loan. According to a 2014 Federal Reserve study, 40 % of people surveyed who wanted to apply for some form of a loan, didn’t do it because they thought that they might not be approved due to their bad credit score. Emergency situations can strike when we are least expecting. In such cases, we quickly have to think of a solution even if are having a bad finance month. There are companies which take different factors into consideration when they have to decide whether to give you a loan or not but they also have more flexible requirements, unlike banks.
Here are a few things you need to know if you decide to apply for a bad credit loan.
What is a bad credit loan?
This type of loan is usually offered to people with bad, weak or no credit score. Banks, credit unions, online lenders are only some of the financial institutions that offer bad credit loans. One of the negative sides of bad credit loans is that they are usually expensive because lenders usually charge higher interest rates to those with bad credit score unlike to those with good credit score.
What is a bad credit?
If you have a bad credit score, it means that your credit history is full of problems like late payments, bankruptcy records. However, you should take into account that different lenders analyze your credit in different ways which help them decide who they want to lend the money to. Also, sometimes your credit score may not be as bad as you think, so its always better to check your credit. Essentially, a FICO score below 630 is considered bad. In case you don’t know your current credit score, you may want to access it through your online bank account or credit card statement or check it at sites like CreditKarma.com or Experian.com.
How to get a bad credit loan?
There are a variety of ways you can get a bad credit loan. It’s up to you to decide which one will work for you. Here are some of them:
Visit credit unions: Credit Unions will be eager to work with you even if you have a bad credit score. They may want to review your application and talk to you personally before deciding to give you a loan
Ask online lenders: Instead of borrowing from banks, you can borrow from individuals who fund your loan. Also, you can source funds from P2P lenders. These online lenders use other creative ways to evaluate your creditworthiness.
Ask friends and family: If your credit score is really bad, tap your friends and family. Since they know you, they will be willing to fund your needs. However, keep in mind that it is necessary for you to do it properly so that everyone is protected. Document the loan terms on paper and involve the third party as a witness.
Are bad credit loans dangerous?
One thing you need to keep in mind when applying for this kind of loan is to trust your lender, In other words, if your lender doesn’t check your credit, that means that they don’t care about you as much as they should. Because, if your lender doesn’t check your ability to repay your loan, it’s a sign they aren’t offering you a safe loan.
Keep in mind that if you are applying for a bad credit loan, it’s important not to drag it out, because it can further damage your credit score. For most loans, try to submit applications within 30 days at most. If you wait a month or two to apply, many problems may arise. For instance, offers may no longer be valid and interest rates may change.
If you are borrowing money to pay off your debt its always good to have a plan or a strategy to tackle your debts. Get a free debt strategy and start your small steps toward financial freedom.