A lot of people apply for or take out a loan without even thinking first of their purpose for doing so and without even planning on how they would spend the money they borrowed. This often results in delinquent loan accounts. If a borrower becomes delinquent, it affects the credit history resulting in a low credit score. Most people with bad credit scores will not get any kind of loan that easily. But even people with bad credit deserve a second chance to improve their finances and bad credit scores should not hinder them from getting a personal loan, especially during an emergency.
Credit scores below 669 to 580 are considered fair, while 579 to 300 is poor. Scores from fair to poor is not a good indication as the lender may see you as a not-so-responsible borrower. If you want to borrow money with these scores, you may need to exert more effort to qualify for a loan. You might need to work on improving your credit standing to get loan approval with better terms and rates.
Here is what you can do if you have bad credit and want to apply for a loan.
Examine your credit status. In general, credit score is a major factor in applying for a loan. Most lenders require the borrowers to have a good score, thus you might be rejected if you have a low score. There are reputable websites where you can check your credit standing online for free. You can also request a copy of it for free so you can evaluate your credit behavior over the years and examine for errors. Fix your credit report immediately if you find it erroneous.
Shop around for different lenders and compare. Each lender varies in processing system, requirements and interest rates offered. Do not settle for the first thing you see online or offline. Ask for recommendations from family and trusted colleagues. Do your own research for lenders that offer a rate that you can easily afford. Narrow down your options for the financial institutions with the most convenient terms for you. You can even find lenders offering installment loans for people with bad credit, if you will search carefully.
Consider pre-qualification. Look for lenders and banks that offer pre-qualification. Pre-qualification is useful in providing you with the loan amount, rate of interest and repayment term so that you have an idea what to expect. It is a basic review of a borrower’s creditworthiness; therefore, you will immediately know if you qualify for the loan you want and which among the types of loans you qualify with.
Look for a co-signer or a guarantor. If you could have someone to co-sign your loan application, there is a better chance at getting the loan you are eyeing for. A guarantor can be very helpful too to someone who has bad credit. The co-signer or the guarantor will take full responsibility once the principal borrower can no longer fulfill the repayment of debts.
Get a secured loan. A secured loan is backed by collateral, which is any financial asset you won such as a home or a car. With a secured loan, banks or lenders will be willing to process your loan application on the merit of your collateral.