While your credit score can be an asset for you to demonstrate your trustworthiness, it can also be a liability.
A full 30% of Americans have poor or bad credit, while 53% have been turned down by a lender for having an insufficient credit score.
Having bad credit can severely impact your ability to access loans, utilities, and lines of credit for yourself and your business. However, securing a loan with bad credit is not impossible.
There is a large and growing range of options for both business and personal loans for people with bad credit. Read on to find out the essential tips for securing a loan with bad credit.
- Know Where You Stand Before Applying
Before you even begin applying for bad credit loans, it is essential that you know exactly where you stand.
There are providers that offer loans with no credit, loans for terrible credit, and loans for mid-range credit. You should never apply for a bad credit loan before knowing your own credit score.
You are legally entitled to request your own credit report from the ‘Big Three’ credit agencies, without being charged for it. Many other banks and credit card companies will give you your credit score as well, so research these options before paying for your score.
- Research the Loan with Bad Credit Market
There are thousands of providers that offer loans for people with bad credit in the US alone. It is important that you shop around and make sure that a lender you are considering is actually right for you.
As this in-depth Bonsai Finance article explains, you should always read online reviews of loan providers before beginning an application.
They also advise that you check the Better Business Bureau to see if there are any complaints linked to your lender.
- Find Yourself a Loan Co-Signer
If you have a family member, business partner, or spouse with a stronger credit score, consider asking them to be your co-signer.
Of course, this is no lighthearted undertaking. A co-signer will be on the hook for payments if you fail to make them yourself.
This means you should only ask someone that you trust and who, in turn, trusts you. With a co-signer, you will be able to benefit from more favorable interest rates that are linked to their credit score.
- Conduct an Eligibility Check
If you’re wondering how to get a loan with bad credit, you should keep in mind that your credit score is not the only qualifying factor.
For most bad credit loan providers, there is a strict set of criteria that all successful applicants must fulfill. You will need to be at least 18 years old and be legally resident in the United States.
You will need to be able to demonstrate your proof of income and have a valid US bank account where the loan can be deposited. There may be other requirements, but these are the basic prerequisites.
- Read Your Terms and Conditions Carefully
Finally, it’s essential that you research and terms and conditions of your loan carefully before applying. Not all lenders are ethical, and some can be downright dubious.
Always read the fine print to find out exactly what the repayment terms are and what kind of penalties exist for non-payment.
Make sure you aren’t signing away any sensitive information and check that you are OK with whatever collateral a provider might be asking for.
If possible, get someone else to also read over the T&Cs before signing an agreement.
If you’re seeking a loan with bad credit, you are likely in need of some additional financial planning advice.
Make sure to browse through the Family section of our blog to learn more about sound financial planning for your family.