Having bad credit can make loaning any amount of money hard. Even if you do get a loan it is usually at very high interest rate because you are deemed a “riskier” borrower. That being said there are ways for you to get a loan, but your goal should still be to build your credit score so that you will be offered loans at lower interest rates. Here are methods that could potentially get you a loan if you have a low credit score:
Credit Unions are not-for-profit institutions that vary in size. These lenders usually offer much lower interest rates compared to traditional lenders. They are also more sympathetic towards people with low credit scores. The downside is that Credit Unions do not offer large loans, they usually offer loans under $2,500. Another benefit of credit unions is that federally run ones have a maximum APR of 18%. Credit unions are also known for being reliable if you need to contact them about your loan, although this will depend on the exact one you are dealing with.
A more modern way to borrowing, you are essentially directly from individual lenders and not an institution. It has grown in popularity in the last 10 years because of the competitive rates it offers borrowers and high returns it offers lenders. On these sites you put down the amount you want, why you need a loan, how you plan to repay, and other criteria. Then lenders will contact you if you meet their lending standards. The benefit of such a system is that individual investors will read your story of why you need the money, hopefully giving you a more convincing case. Whereas big institutional lenders will just read the numbers of your credit score. That is not to say that investors will not look at your credit score, rather that they will hopefully consider other factors.
Loan providers who will review your case with you
Usually smaller lenders, these companies tend to be more willing to read applications and work with people to find a loan solution that works for them. They may also have alternative forms of providing you with money like an unsecured credit card even if you have a low credit score.
Consider a secured loan
It may just be the case that lenders will not provide you with an unsecured loan if your credit is not high enough. At this point you may have to bring some sort of collateral to the lender. Be careful with any secured loan though as if you default on your loan will lose whatever you put up for collateral.
Consider a co-signer
Some companies will consider giving you a loan with a co-signer if you didn’t qualify without one. Try finding someone who knows you well and ensure them that you will follow through on the repayment schedule. Also make it clear to the co-signer that if you are unable to repay the loan, the lenders will hold them liable for the remaining balance.
This guest article has been submitted by Risha Ellison, a freelance finance blogger specializing in the bad credit and debt industry.