4 Options to Get a Loan with Bad Credit
If you are like most people, you will need a loan at some point in your life. To get a loan you usually need to have steady income and have a good track record of paying bills and re-paying other debts. If you have failed to comply with these obligations in the past, your credit is probably poor and you will have a difficult time obtaining a loan when you need one.
This is not to say that you will be unable to get one, it may just be a little more difficult with fewer options and the terms may be more stringent. If you have poor credit and require debt consolidation, below are ways you can increase your chances of getting a loan for whatever it is that you need.
1. Get a co-signer
When someone has bad credit or a lot of existing debts, lenders usually require a borrower to obtain a co-signer to guarantee payments are made when required. In the event you are unable to fulfill your obligations in re-paying the loan, the co-signer will be responsible.
While you are committed to paying back the loan and are positive it will not become the responsibility of your co-signer, lenders nonetheless like this guarantee to ensure they will receive payments. The person you use as a co-signer must have good credit and be able to show stable employment which demonstrates a regular income.
Obtaining a loan with a co-signer will result in an improved score for you if you make payments regularly or a damaged score for you and your co-signer if you fail to fulfill your obligations.
2. Use online options
Online options such as peer-to-peer lending or bad credit financing have become popular due to the high rates that they approve loans. Lenders through online financing options offer competitive loans and they are quick which is especially appealing in cases of emergency. Once you complete the application, a decision can be made in minutes and funds can be deposited into your account within hours or a day.
Many people with bad credit are able to obtain the loans they need because their credit score is only one factor in the lender’s decision meaning that if you are employed, have assets, or can prove a reasonable monthly income, you can still get approved.
3. Credit unions
Credit unions are not banks. They are institutions owned by their members who share profits and are able to borrow money at low interest rates. If you need a loan but have bad credit, this may be a great option for you.
Many credit unions are affiliated with different social groups or occupations so finding one that applies to you would better your chances of being approved as a member and in turn getting approved for a loan. For instance, if you are a civil servant, determine whether you have a credit union that serves you and your co-workers.
If you are a veteran or a teacher, chances are there is a credit union to serve you, all that you need to do is identify which one will help you. Because credit unions are smaller lending institutions compared to banks, they will look at you personally and your overall circumstances and make a decision based on this instead of just your finances.
4. Use your home equity
Lenders are more likely to approve loans if borrowers have collateral. If you own a house or automobile, this can be used to obtain a loan with the understanding that the lender will obtain ownership of the item if you fail to make payments.
With this option, you need to be careful that you can indeed re-pay the full amount of the loan. You would hate for the bank to take your home because you did not make regular payments in a timely manner.