If there is one thing that people agree on, which doesn’t happen quite often, it has got to be the common concern caused by finances. From CEOs to entry-level employees, everyone is worried when it comes to money. Between the high costs of living that only seem to be going up and the wages not nearly increasing at the same rate, getting into financial straits is very common in this day and age. You could quickly find yourself in debt if you are not too careful, and getting out is much more complicated than falling in. A lot of people use loans to solve their problems, but what if you have bad credit?
Is it possible to get a loan with bad credit?
The short answer is, yes, you can. But it is far from easy or simple. Having bad credit entails a lot of complications that you really don’t want to have on your plate at any point. It hinders all aspects of your life, and as a result, you face difficulty in a lot of things from getting a loan to renting an apartment. Fortunately, there is a way out, and you can get a loan even with your bad credit, but it’s a lot of work and an uncertain end result. But what other options do you have to get legit personal loans for bad credit .
How you can get a loan with bad credit
Checking credit score
You naturally need to be well aware of your situation before taking any action. That means checking your credit reports to find out just how bad things are and, more importantly, make sure there aren’t any errors with your history. For example, you might find a negative remark in your report that you missed a payment, while you, in fact, didn’t miss it and it was paid on time. This is an error with your credit history, and you need to fix it as soon as possible because such negative remarks are something that a lot of lenders take into consideration.
Improving your credit score
The first step you need to do in order to boost your chances of getting a loan is working on your credit health. This means taking things seriously and paying all future installments and credit payments on time. This is the first thing lenders will take into consideration, and if you’re still slacking off when it comes to timely payments, your loan application will most likely get rejected.
To further improve your score, you should immediately stop using your credit cards, unless it is an absolute emergency because every transaction you make with your bad score makes you look like a reckless spender. And no lender wants to deal with a liability like that. You also shouldn’t take any new credit, because this pattern might cause a lot of problems if lenders noticed you’re taking out credit you can’t afford, while you are already neck-deep in debt. So, maintaining the status quo and acting responsibly is the first thing you need to do for your credit score to improve.
Your next step would be trying to find a lender, which, while doable, takes a lot of effort. Sure, you could start out by checking friends and family to see if anyone is willing and able to lend you the money. If that doesn’t work, you need to put in some effort to find a lender that accepts low or bad credit scores, and you will find plenty. The trick isn’t just in finding any lender, but rather finding the right one. The problem with having a bad score is the fact that you are considered a risk for most people willing to lend you money. This is why they are going to impose high-interest rates for cases with bad scores.
Because of those higher interest rates, it is imperative that you shop around for a lender, instead of just settling for the first offer you get. There are different sources out there, and some will have very high-interest rates –– and in some cases, application fees. So, take your time looking until you find the best offer possible for your current circumstances.
There are other options that you can resort to when you need a loan with a bad credit history. Credit unions, for example, are usually a great option for people who don’t need huge sums of money. They offer a fixed interest rate of 18 percent, which is significantly less than your typical lender in cases with bad scores.
Other alternatives you may resort to might be getting a secured loan, which means using a collateral like your car or house, or any other assets you have. You should know that this is a risky option because your collateral is seized if you fail to meet loan terms, so don’t take the decision of getting a secured loan lightly.
Beware short-term loans
These might be filed under the alternatives category, but they can be much more problematic. Short term loans like auto title loans come with a very high-interest rate, even higher than the average for people with bad scores. They are also very short term, meaning they are to be paid within 6 to 12 months at the most. This is naturally not very convenient for a person trying to get out of a financial jam. Payday loans are just as risky, if not more, and people end up taking payday loans one after the other because their salaries at the beginning of the month can’t even cover the previous money borrowed plus the high interest.
It is definitely bad to find yourself in need of a loan while having a bad credit history, but it is not the end of the world. There are ways out, and it is possible to get a loan to help you pay off your debts. There is even a kind called ‘debt consolidation loan,’ which basically consolidates all your debts under one loan. These are the kind of solutions you need to consider, but remember to take your time finding lenders because of the high-interest rates.