06 May Can I Get a Loan with Bad Credit?
Getting a loan with bad credit can be really difficult. You might need a loan for a car repair, medical debt, other unexpected debt, or even a consolidation loan. The good news is, yes, you can get a loan with bad credit, but you may stumble across challenges along the way. This blog post covers why bad credit can make getting a loan difficult, what lenders look for besides a credit score, options for bad credit loans, and tips for getting approved for a loan with bad credit. Let’s jump in!
Why bad credit matters
Your credit history tells lenders whether you are trustworthy and responsible with money. A low credit score suggests you haven’t paid loans back, have public records against you, or have defaulted. If you don’t have good credit, getting a loan will be tricky.
The good news is, that credit isn’t the be-all and end-all of loan eligibility. Other factors, like stable income and history of on-time payments, a stable debt-to-income ratio, and collateral the bank or lender can use show that you’re creditworthy.
Your loan options with bad credit
Even with bad credit, you still have an array of options, including bad credit personal loans, a co-signer loan, and secured loans. The following section details what these are and how to get them.
Bad credit personal loans
Bad credit personal loans are designed for people with lower-than-average credit scores. Beware–these loans are more expensive than others. You can expect higher interest rates, but this is to ensure that you pay back what you owe sooner. They can be a good option for unexpected credit. Note that loans like these can make or break your credit.
Co-signer loan
A co-signer loan is exactly what it sounds like. Someone else co-signs your loan so that they are responsible for paying the debt in the case of your default. If your co-signer has a good credit score or a history of behaviour with credit, you can much better loan terms and interest rates.
Secured loans
Secured loans use collateral– something that can be taken away if you don’t pay– as insurance that you’ll pay up. This reduces the risk for the lender, opening doors to home, auto, consolidation, and personal loans.
Tips to get approved for bad credit loans
These are tips from our credit and loan experts to get approved for bad credit loans.
Shop around
It’s helpful to shop around for loan terms and interest rates from different financial institutions.
Improve your credit score
While it may take a while, improving your credit score is a surefire way to secure better interest rates and loan terms.
A credit score improvement crash course
Follow these tips to improve your credit score
- Maintain a low credit utilisation rate (how much credit you use compared to what you have available)
- Pay on time and in full. This is integral to upping your score.
- Diversify your credit portfolio. Think insurance, utility bills, contracts, and small loans.
These are tried and true methods that repair your credit score. Remember, these don’t work overnight, so it’s important to be patient.
Be upfront about your circumstances
Be fully transparent with lenders, being fully truthful about why you need a loan and how you plan to pay it back.
If you have multiple debts, consider getting a consolidation loan with Debt Refinance. We’re here to help you get your financial freedom back. Get in touch with us today!