When you apply for a loan, the lender will check your credit. This is a fact of finances. Suddenly you find yourself in need of money.
Maybe you’ve made some financial mistakes in the past. Maybe you don’t have the credit history to prove your creditworthiness.
Bad credit can make getting a loan near impossible. The good news is it’s not impossible!
Some lenders even cater to people who have low credit scores.
If you’ve made some financial missteps in the past, don’t fret just yet. You may qualify for bad credit loans to get you back on track. Here are 7 signs you may qualify for this type of loan.
1. You’re Willing to Pay High-Interest Rates
One of the major drawbacks of getting a loan when you have bad credit is the interest. Lenders want to make sure they get their money back.
If you have bad credit, you are seen as a bigger risk to most lenders.
If you find that you can only qualify high-interest loans, make sure you have a clear understanding of the terms. These loans can be difficult to pay off.
2. You Can Get a Co-Signer
If you have bad credit, one of your best options is to get someone to co-sign on the loan. This person needs to have good credit or better.
Usually, this person is a parent, sibling, or significant other.
Co-signers give lending institutions someone to go to if you can’t make your payments. The idea is that the co-signer promises to help you make the payments.
Interest rates are calculated using the credit score of your co-signer. This means your interest rates and terms will be easier to manage.
Keep in mind that if you fail to make your payments, the other person’s credit will be equally affected. Payment information is recorded to both credit reports.
If you value your relationship with this person, make your payments.
3. You Can Join a Credit Union
Credit unions use different factors to determine your creditworthiness. They use a holistic approach to evaluate your financial health.
They may consider your residence, your employer, or your education. If you can get a membership, you may find loans with less strict requirements.
Some credit unions even offer programs designed for people with bad credit.
The problem here may be qualifying for membership. Laws demand that credit unions have defined membership guidelines.
You may need to be employed by a particular company, attend a particular school, or be a member of a specific church.
If you meet the criteria, you may find it much easier to secure a loan with bad credit.
4. You Can Put Up an Asset as Collateral
You may be playing a dangerous game here. Some lenders may offer you a secured loan, meaning you must offer your house, car, or another asset as collateral.
If you default on your loan, the lending institution can take possession of this asset to cover the losses.
If you choose this option, make sure you understand the terms. Avoid loans with high-interest rates or short lending terms. These will pose more risk to you.
On the bright side, these loans are usually easier to get. They offer lower interest rates and more favorable terms.
5. You Have the Patience to Shop Around
You can benefit from doing a bit of research. Visit multiple lending institutions and discuss your financial situation.
Some lending institutions are more forgiving than others. Some lenders offer programs for people with poor credit.
Beyond that, visit different types of lending institutions. For example, you may have better luck with a credit union than a major national bank.
Consider online lenders. Some online lenders offer high-interest loans to people with bad credit. If you’re willing to pay the interest, this may be a good option for you.
Loan shopping will also give you an opportunity to compare APRs and terms. You can make a sounder financial decision.
Try to avoid taking the first loan you get approval for.
As with any loan, you need to be careful and read the fine print.
6. You Can Get a Payday Loan
Payday loan lenders often get a bad reputation for preying on low-income borrowers. Each state has different laws regarding the terms allowable to mitigate this issue.
When searching for a payday loan, make sure the loan is safe and secure. You don’t want to get caught in a debt cycle. Check the terms of the loan, and make sure the lender is reputable.
Some payday lenders understand this issue and offer reasonable terms. Online lenders, such as Bonsai Finance, don’t have the same overhead expenses as traditional lenders.
Payday loan lenders may not require a credit check to approve your loan. You will have different options depending on your particular financial needs.
You can get small loans, ranging from about $50 to $500. There’s typically a small fee that must be paid along with the loan amount by your next payday.
7. Consider an Auto Title Loan
You may also qualify for auto title loans. Although, they typically have short terms and high-interest rates.
To secure this type of loan, you hand over the title of your car in exchange for the appraised value of your car. You will need to own your car outright. Terms are around 30 days on average.
If you fail to pay back the loan, the lender will take possession of your car.
There are predatory lenders who will try to scam you out of your money. Protect your assets and do some research before taking out an auto title loan.
Should You Apply For Bad Credit Loans
Borrowing money can be challenging money if you have bad credit. You may find it difficult to get approval on any loan.
If you can get approved, should you do it? You need to consider the future of your financial health. Life happens, and there are some instances in which taking out a loan with bad credit can help you.
For example, many credit cards have higher interest rates than most loans. It may make sense to take out a personal loan to pay off the credit card debt. You would pay less in interest over the long term.
You may also find that getting a personal loan will be better in the long term than using a credit card for unexpected expenses.
You will need to compare loan terms and decide for yourself. If you can only qualify for high-interest loans, it may not be worth it to consolidate your debt this way.
If you’re not careful, you could end up paying more in interest.
If you only need a small amount of money, it may be difficult to find any loans. Many lenders have minimum loan requirements.
Take Steps Toward Better Credit
One of the best things you can do if you find yourself with bad credit is to make some changes. Be mindful of each and every one of your credit account balances.
If you have any credit cards, make sure you keep your balances under 30% of your total line of credit. Maxed-out lines of credit or over-the-limit balances can do serious damage to your credit score.
Make at least the minimum payment each month on time.
Avoid opening too many new lines of credit within a short period of time. This is a red flag to most credit reporting agencies. It often indicates that you’re not handling your finances responsibly.
If you have old lines of credit, keep the accounts open even if they’re paid off. This will improve the average age of your credit accounts.
You can check your credit score online without damaging your credit. Your bank or credit card company may provide you with a credit report each month.
Understanding your credit score and what it means is vital to maintaining good financial health.
Get a Loan With Bad Credit
If you find yourself with bad credit, you may find it near impossible to get a loan. Unfortunately, you may find yourself in need of money.
Having bad credit does not mean you are at a loss. If you shop around, you can find different loan options that suit your needs.
Bonsai Finance offers a variety of bad credit loans with or without credit checks. Check out our online lending options today if you find yourself in need of cash.
Don’t let bad credit get in the way of your future.