Money Management

Bad Credit? How to Get Approved for a Personal Loan

When you need money but have bad credit, it may seem your only options for a loan are payday and title loan lenders. The lenders do not run credit checks and approve almost everyone. The loans include higher interest rates than traditional loans and repayment terms often are unfavorable to the borrower.

It may not seem like you can get a personal loan if you have bad credit. Although challenging, getting a personal loan with bad credit is possible when you know the right steps to take. Personal loans offer more favorable terms for borrowers.

Personal Loans for Bad Credit

There may be many situations in life that require money not readily available to you. In those situations, loan lenders put cash in your hands within a few days or sooner. People use loans for reasons including:

– Pay bills

– Money until payday

– Vacation

– Back-to-school shopping

– Home repairs and improvements

Loan lenders run credit checks on all applicants. They want to know their money is in good hands, and that it will be repaid as promised. Credit reports give them a better indication of your odds of repaying the loan.

If you have bad credit, lenders may not be so quick to approve your loan application. They may worry that you will not repay the loan or will face financial difficulties before it is repaid in full. For this reason, many people turn to payday loans and title loans.

The aforementioned loans include steep interest rates and penalties. Experts recommend avoiding these types of loans when possible.

Bad credit may cause challenges when applying for personal loans, although does not automatically disqualify you from approval. When you know the secrets to getting a personal loan with bad credit, you can breathe a sigh of relief.

Lenders understand the importance of credit. Luckily, many also understand bad things happen to good people that can negatively affect their credit scores for years to come. Your job is to find those lenders and avoid the rest.

Tips to Increase Approval Odds for a Bad Credit Loan

People just like you get approved for personal loans every single day. If you want to be the next, use the tips below to increase your chances of getting approved for a personal loan.

Compare Lenders

It is safe to say some lenders automatically go on a list. We know the lender will never approve us for a loan due to our poor credit history. Do not waste time with those lenders.

If you aren’t sure which lenders go on the list, go online to compare their loan requirements and terms. This will help you quickly narrow down the list.

Look for Specialized Lenders

Some lenders understand how easily a missed payment or other hardship can ruin a person’s credit. Known as bad credit lenders, the specialized loan lenders use factors such as income and length of employment to determine loan eligibility versus a credit score. People with poor credit scores have a better chance of getting approved for a loan using a specialized lender.

Consider Online Loan Lenders

Many financial institutions offer their services online only. Online lenders offer more flexible lending criteria than traditional banks and financial institutions. Search online loan lenders when you need fast cash but credit woes stand in your way.

Beware the numerous loan scams found in the online world. Spot them by:

– Running their name through the Better Business Bureau (BBB) website

– Google their name with the word “scam” or “review” to find out what others think about the lender

– Avoid offers that sound too good to be true

– Always apply for loans on secured sites. This is a site that uses HTTPS with a lock symbol versus an HTTP (without an S or padlock symbol) in its web address.

Get a Cosigner

A cosigner is an individual with good credit who agrees to take responsibility for the loan in the event you renege on it. Asking someone to cosign for a loan is a significant decision that can have serious impacts on their credit.

Your chance of getting approved for a personal loan significantly increases when a cosigner backs the application. The cosigner may even work to your benefit to improve the terms of the loan.

Ask someone with whom you have a close relationship to cosign the loan. Show appreciation for their willingness to cosign by ensuring the loan is repaid as promised.

Consider a Secured Loan

Personal loans generally are unsecured, meaning there is no collateral required. However, people with bad credit may want to inquire about secured personal loans which require collateral. Securing the loan with collateral such as property greatly increases your odds of getting approved.

Improve Your Credit

This tip obviously can’t secure a loan now, but can help in future situations. There is no better time than the peasant. When you are most affected by your credit you are most likely to make changes.

– Pay bills on time

– Educe credit card balances

– Pay off unpaid debts

– Limit hard-pull credit inquiries

– Use credit-building tools

Apply for Loans at Credit Unions

Credit unions are member-owned financial institutions. They offer many of the same services as a bank, although much smaller. Invidiauls must join credit unions. Members have a say in bank decisions and enjoy lower interest rates on loans and more personalized services.

Speaking of loans, credit unions typically offer more lenient terms and approve more applications than banks. If you have an established relationship with a credit union, ask about their loans. If you do not have an account with a credit union, it may benefit you to become a member.

There is Hope for Bad Credit

It is nice to know you have options for a loan when you need quick cash. Use the tips above to help secure a personal loan. It is much better than a payday loan or title loan, and once it has been repaid, may even help rebuild your credit.