Knowing how to get a loan with bad credit can be a bit of a challenge. Your credit score, or FICO score, is a vitally important three digit number that lenders use in order to make sure you a good credit risk before they give you money. It is still possible to get a loan with less-than-perfect credit.
Getting a Bad Credit Loan
Usually, the easiest bad credit loans to get are those with secured debts, such as mortgages for people with bad credit or car loans. The reason these types of loans can be a bit easier than standard loans is because you have collateral for the money you borrow and this gives the lender security. If you default, the lender will have something they can take back. When you get a personal loan, on the other hand, there is no collateral.
Shopping Around for Lenders
First, begin by shopping around for lenders. You will need to be persistent and will need to apply to several lenders. You will need to make calculated decisions when you shop around. Don’t have everyone pull your credit because this can do even more damage to your score by giving you a number of inquiries. Talk to the loan officers first and make sure that they believe you will qualify.
You may also want to try smaller local banks or credit unions when you are doing this shopping around, because they may be more willing to overlook some bad credit problems in the past. You can also look for banks that are will evaluate your loan based on your income, instead of just your credit score. If you have a good explanation for your bad credit, a lender using traditional underwriting standards may be able to do a lot for you with a good income.
Sub Prime Lenders and Bad Credit Loans
Be wary of sub-prime lenders. While there are sub prime lenders and payday lenders who are more than willing to lend money to you, this can end up creating a major financial mess. With punishingly high interest rates, you may never be able to make your payments if you go with a sub prime lender, thus making your bad credit situation worse. Get a co-signer. If you can find someone with good credit who is willing to sign for your loan with you, you’ll be able to get a loan much more easily. All in all, you do have options, so just take your time, be patient and rest assured that you will get a loan somewhere with bad credit.
by Ethan Leak