If you are one of those people dealing with the trouble of bad credit and accept that you are not going to qualify for a personal loan, you are wrong. While poor credit increases the difficulty of obtaining loans, it is not impossible. Even with people who have bad credit, the options of borrowing money are not closed although using those options depends on your requirements. On the other hand, you can never boost the credit score without securing a credit card or loan. You can make the payments within time after obtaining a loan from a financial institution to progress towards repairing your credit. Having poor credit does not imply that you are bad, but it is a track record that shows how good you are when it comes to the repayment of loans. There may be numerous reasons for you to get into a bad shape with your repayment or when you max out your credit card.
Requirements of loans
Lenders have different cut off credit scores and if you fall below this score, and there are few chances of getting approval when it comes to obtaining personal loans for bad credit. However, if you stay above the mark, the chances of approval are going to be more prominent. Apart from this, there are other factors that the lender is going to consider such as the ratio of debt to income to decide whether you can get the loan and even if you qualify, what is going to be the rate of interest.
The following are the loan options you can seek with bad credit.
- Poor credit loan
This may not be the best option to seek, but sometimes it is the only option you can get. While it is easy to get these loans, try to avoid the habit of getting into the cycle of debt with timely payments. When you default, the debt becomes very difficult to manage due to higher rate of interest. Be sure that the requirements are greater than the risks and you follow a regular plan of making payments within time.
- Loan from credit union
When you become a member of the credit union, you are sure to get a lot of advantages such as favorable terms of loans and interest rates than the conventional financial institutions. As a member of the union, you can make sure than the loan terms are going to be more relaxed as they are known to offer money at a cheaper rate when compared with banks as they do not intend to focus on the profit. Several credit unions offer unsecured loans to people with poor credit.
- Home equity line of credit
The home equity line of credit is a reasonably good option for people with bad credit, but it is only available for the homeowners. Apart from this, you must have substantial equity in it to borrow against that. Securing this loan amount is easier than the rest of the options as all that you need is a loan ratio of eighty percent to qualify, which aligns with the capacity of those people troubled with bad credit.
- Co-signing for a loan
If you can find someone with good credit who is ready to co-sign for a loan, it is another option to secure finances at a lower rate of interest. For instance, you can talk to a home or family member about the financing option when you need to acquire money but are worried about the low credit score. Remember that if you fail to pay back this loan amount, you friend or loved one is also going to be held responsible and your actions is going to affect the score of the co-signers as well.
- Loan from friend or family
This is undoubtedly one of the best options to get money when you have bad credit. Furthermore, if you feel comfortable to request for the loan amount, you need not get approval from any bank or need to negotiate the rate of interest. The only thing that you may damage when you default on this loan amount is the relationship you share with the person. Even if you decide to go for his option, make sure, there is a written agreement clearly mentioning the amount of money you have taken and the time within which you intend to pay it back.
Business loans
Generally, you have higher chances of obtaining business working capital loan when you have good scores. However, there are options of securing finances even when your credit score is below the limit. Today, you are more likely to come across alternative money lenders and there are plenty of bad credit business loans available. Often these loans come with short terms of repayment, higher rates of interest that can wreak havoc on the business revenue. Try to ensure that you are going for the most affordable option while trying to get money and avoid expensive funding options.
