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When your credit is really bad, it would be hard to convince traditional lenders ad banks to lend you money. They’d generally think that the risk of you not being able to pay the loan back is really high. So expect that they will likely decline any attempt on your part to secure credit.
How to Get Approved For A Loan While Having Bad Credit
There are specialist lenders, however, that may consider taking a risk on you and offering you a loan despite your current financial circumstances. However, these loans generally come with a price. Normally, you will only be allowed to borrow a smaller amount for a much shorter term but at interest rates that would be considerably high. Below are some loan options you can consider tapping if your credit is really bad and you need a loan.
Tap on your home equity
If you’re a homeowner, you can always tap into the equity of your home in order to get approved for a loan. Lenders will be more lenient to borrowers with really bad credit when there is security involved which makes this a really ideal option for you. However, do know that you are at risk of losing your home if you cannot pay the loan back.
Find a guarantor
Loan approval is also very likely when you can present a guarantor. Lenders will see you as less risky knowing that there is somebody that can be made responsible for the loan payments of you will be unable to make it. A guarantor has to have a good credit standing though and should be employed in order to get approved by the lenders.
Sign up for a payday loan
If you need cash fast, a payday loan is something you might consider. Available for smaller loans and meant to be paid by the end of the month, it can be a great tool if you need something to tide you over until you get your regular cash source. Payday lenders charge very high interest rates though so exhaust other options first before taking out this loan.
How To Acquire Such Loans
Looking for a way to have extra money to cater to your necessities or in times of emergencies or for whatever personal reason? Then a personal loan is for you as it has the lowest interest rate compared to credit cards, thus making it a great for one-time expenses. According to the Federal Reserve, the average interest rate on a two-year loan is 10.70% compared to credit card rates of 17.69%
Whether you want to borrow from a bank, online lender, or a credit union. The process is more or less the same.
Run the numbers – Make sure that you have the ability to pay the loan you took out. Find out what your monthly payment would be.
Check your credit score – Your credit score shows how much are you likely to pay your loans. Having a fair or good credit score will give you lower interest rates.
Weigh and consider your options – Depending on whatever credit score you have, you need to consider your options on where to get your loans.
Look for the best rates – Setting for the first offer may not always be a good thing. Make sure to choose the best interest rate that you can handle as to not affect your credit score.
Things to Consider
Choose a lender and apply, and also have the proper documentation – After you have done your research and weighed the best option, you can then start the application process. Every lender requires different information but these are the most common ones. Must be 18 years or older, a valid Social Security Number, U.S Citizen, and is employed or is receiving a monthly income. Most lenders require you to have a checking account to receive the loan
Pay out the loans – After getting approved, you’ll be presented with the terms. Once done, it can take two days to a week for you to receive your loan. You must be diligent in paying your loans as to avoid pile-up and also having a bad credit score in the future.