Looking to take a loan with a bad credit score?
The good news is you can, the bad news is you may have to pay a higher than average interest rate.
Having a bad credit score isn’t a death sentence. Whether it’s a job loss, bad economy or mismanagement of funds that has led you to have a bad credit score, bad credit doesn’t have to follow you forever.
Loans for bad credit may be hard to find, but that doesn’t mean you can’t access one.
Here are tips on how to fix your bad credit score and nine of the best loans for bad credit.
How to Fix Your Bad Credit Score
Fixing a bad credit score doesn’t happen overnight. It needs a lot of discipline and commitment.
Follow these tips to restore your credit to a good score:
Know Your Credit Report
The first step to fixing your bad credit score is knowing your exact position. There are so many online tools that you can use to get your report.
While at it, make sure you confirm that there are no errors or fraudulent activity. Fixing these discrepancies can raise your credit score.
Pay on Time
Late payment of bills kills your credit score. Try setting your bills on auto-pay to avoid missing deadlines and further lowering your score.
Avoid Using Available Credit
Taking a loan when still in debt isn’t a good idea. Nonetheless, make sure you maintain a credit utilization ratio (outstanding balance vs. your total credit limit) of not more than 30 percent.
Don’t Close Your Accounts
Having an account open for a long period of time lengthens your credit history which boosts your score. You can use this account to pay small bills.
Slow Down on Credit Inquiries
Applying for a lot of credit cards and getting rejected can drag down your score. Resist from applying for a lot of credit cards at the same period.
Tips for Getting a Loan with Bad Credit Score
Now that you’ve taken a step to fix your score, the next step is figuring out how to get a loan with your score.
Here are some tips to consider.
Check Your Credit Reports
This information is usually used to calculate your credit score. It also affects your odds of a loan approval loan and the terms you’ve qualified for. Make sure your credit report is accurate.
Improve Your Credit Score
As mentioned before, improving your credit score even slightly raises your chances of getting approved for personal loans.
Compare Your Options With Multiple Lenders
Different lenders offer varying interest rates and terms. Don’t settle on the first loan you get approved for. A lender may offer you a loan with a 21 percent annual rate, while another may offer you the same loan at 17 percent.
Not all loan features are calculated equally. You can find and compare loans using our online tool.
Know the Different Type of Loans
There are two main types of loans you can consider – unsecured and secured loans.
Unsecured Loans
These are mostly used to refinance high-interest rate debts, for example, personal loans. They’re usually more difficult to obtain.
Secured Loans
These types of loans are usually secured by collateral and are a great alternative
to unsecured loans. They offer lower interest rates making them more convenient for borrowers with bad credit.
Know the Type of Loans to Avoid
As much as you may be desperate for a loan, some aren’t worth taking.
These include payday and auto title loans. These are usually short term loans with very high interest rates and fees. They devastate customers by charging annualized interest rates of up to 1.5 percent a day.
Best Loans for Bad Credit
You can now consider this list of lenders and what they have to offer.
1. Personal Installment Lenders
Their loans can be used to cover emergency expenses and consolidate higher interest debts.
When reviewing your application, they not only consider your credit score but also your credit health and employment status.
2. Consider a Credit Union
Credit unions are like banks, however, they don’t evaluate you solely on the basis of credit score.
To get a loan, you must become a member of the union. You can search for credit unions in your locality or at your workplace for convenience.
3. Secured Loan
To be considered for this type of loan you’ll have to offer an asset (home or car) as collateral.
Lenders will likely give you a loan because they’re legally allowed to acquire your asset in case you default.
4. Find a Co-signer
Consider applying for a loan with someone with a good credit score. The interest rate for the loan will be calculated based on the credit rating of your co-signer.
Keep in mind that your co-signer will be equally responsible for the payments.
5. Peer-to-Peer Lenders
You may want to consider individual lender loans. Since they aren’t established financial institutions, they may overlook your bad credit score. Even better is the fact that you’ll agree on an interest rate with the lender.
6. Family and Friends
If your family and friends are well off, you can take a soft loan from them. In most cases, you’ll get flexible repayment terms and won’t have to pay interest.
However, it’s always a good idea to have the loan agreement in writing.
7. Lifestyle Finance
This is a reputable financial lending broker, working with some of the best lenders in the country.
They do offer bad credit loans, however, you’ll have to give a clear account of your past defaults.
8. HandyCash
HandyCash understands that bad credit scores are always not due to bad financial decisions, but unforeseen circumstances. That’s why they’re focused on offering immediate bad credit loans at reasonable interest rates.
9. Crester Credit
With over three decades in business, Crester Credit is one of the most trusted bad credit lenders in the country. They offer loans at affordable rates and set up personalized loan repayment plans for every customer.
Get Loans for Bad Credit Easily
Remember to keep your expectations realistic. You’ll undoubtedly receive higher interest rates on loans for bad credit.
Here’s a guide to help you keep a good credit even if you can’t pay everything on time.
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