Are you ready to hear this? It’s possible to qualify for a loan even with bad credit. A poor credit score is a breakdown for loan borrowers mainly because this is one of the major requirements for most loan lenders.
A credit score is a three-digit figure which portrays your creditworthiness. Scores from 700 and above are considered good which favors your credit approval while the score from 630 and below is considered poor which may limit you to loan requests. A fair score ranges between 631 and 699.
Having a bad credit score doesn’t mean it’s the end of you with loans. You can still be approved for some loans.However, there are certain things to keep in mind while applying with bad credit history. How’s that? Let’s find out.
How to Be Approved for a Loan With Bad Credit
1. Look for Lenders With Favorable Terms
What do I mean? I’m I saying that it’s possible to get a favorable deal with bad credit? The answer is yes although you will have to do some more digging to get them.
Look for lenders that are open to credit scores similar to yours. Some lenders will even grant you a loan with a score of 580.
With the help of a bad credit loan, most people with a poor credit score will be able to regain their financial stability and save thousands. Whether you’ve had a loan denied in the past or fell on hard times, consider a bad credit loan from a lender that offers low-interest rates and flexible terms.
2. Look for a Cosigner
A cosigner is a person who promises to pay back the loan in case you default. This can be a friend, a relative, or a colleague with a good credit score.
During application, the loan terms will be based on the cosigner’s credit score but payment information will be recorded on both your credit reports. So, if you default, don’t think that you are the only one who will suffer, your cosigner will also face the consequences.
That is why it’s important to look for a cosigner that trusts you.
3. Get a Home Equity Line of Credit With Bad Credit (HELOC)
If you own your home, you can use it as collateral during the loan application. This will reduce the risks involved making it easy for the loan lender to approve your application.
Of course, if you default, your home will be taken softly. So, you must be careful about this decision. If you have other housing investments, consider putting them as collateral first to avoid losing your home.
But if you are sure of timely loan repayment, collateralizing the loan with your house will lower the interest rates.
4. Use a Pre-Approval Tool
A pre-approval tool can help you identify if you’ll be approved for a certain loan or not. It is however not a guarantee that you will get the loan but will give you an idea of which lenders you can qualify with and with what rates.
The inquiries for approval do not affect your credit score unless you decide to take the loan. The tool allows you to check the loan rates after submitting some requirements which include:
- Personal name, location, and contact address.
- Income and employment credentials
- Loan amount to be borrowed
- Social security number
If you are to borrow a mortgage loan, the requirements will increase to:
- Bank asset statements
- Monthly debt statement
- Rental, divorce, insolvency records.
After submitting these requirements, a soft credit check will be done and later notified if your loan pre-approval has succeeded and under what rates. Just remember that this is not an assurance of loan approval.
5. Take an Online Loan for Bad Credit
There are some types of loans specifically for bad credit especially the quick loans online fast. For instance, payday loans are the best fit for this purpose since there are no credit checks involved.
Just make sure you repay the payday loans in time to avoid additional charges.
Conclusion
Bad credit is not the end of you with loans. But ensure later on, “you get credit repair or credit restoration. You can get your credit fixed easily with a professional company,” says Noelle Randall, an investment coach.
