When you want to get a loan with bad credit, you need to do a bit of research and plenty of legwork. Bad credit does not always mean you will be shut out of the ability to get financing. It usually means that interest rates will be higher, you have to shell out some extra fees and you need to get creative in your loan-shopping plans.
Credit Unions
Local credit unions can be an excellent resource if some larger commercial institutions won’t give you the time of day. By visiting a credit union, you can sit across from a loan officer, an actual person, who can evaluate your credit history, but also look you in the eye and ask contextual questions. That can be a valuable strategy to explain some of the how and why behind your credit score.
As opposed to the big banks, which see you as a credit score, the credit unions will take a look at you from a personal point of view. Which can help you if you have some late payments in your history, instead of more serious issues, like foreclosures or tax liens.
Peer To Peer Lenders
In the internet age, knowing how to get a loan with bad credit is a little bit easier, because it has opened up new sectors of the financial services industry. You could bypass traditional lending institutions like banks and credit unions by going straight to other individuals. Peer to peer lending networks are becoming more and more popular online.
Basically, how it works is individuals and investors with a little bit of extra cash lying around can use a website to find people that can’t get loans from traditional lenders. The individual lenders charge slightly lower rates because they don’t have branch networks and other business lines to fund. You might have to pay a 1-5% origination fee to the site that facilitates the transaction.
Go The Cosigner Route
Asking friends and family for financial help might not be the most fun option, but if you can swallow your pride you can get going on the right track. Banks might be much more willing to consider you as a loan applicant if you have a creditworthy cosigner on your paperwork.
This puts some added pressure on you, since you will be putting your cosigners on the hook if you cannot handle paying back the loan. It might be more than your credit score on the line: Your relationship with friends and family could be at risk.
While you should be able to to get a loan with bad credit, it is advisable to try to improve your credit for better long-term financial health. Get your spending under control and pay down your credit cards and you should be off to a good start.