A credit score is the first thing a lender notices in your loan application to determine your credibility. If you have a credit score equal to or above 750, then you can get a loan from any company or credit union at a low interest. While a good credit score comes with many benefits, keeping your scores as high as 750 is not a piece of cake.
You need money management skills and a regular and stable source of income to repay your loan on time and with interest. Of course, there are many ways you can improve your credit score, but what if you need to finance an emergency expense quickly? What if you have an urgent requirement that can’t wait until you have a good credit score?
How to Get Loans Even if You Have Bad Credit?
Well, many financial companies and moneylenders offer loans to borrowers with fair and poor credit scores. But, there is a catch! You will be charged a high-interest rate for borrowing a loan with poor credit history. Besides that, the lender may ask you to put your home equity or other valuable property as collateral. Should you fail to repay the loan, the lender will have the right to seize your property and sell it to offset the loss. Here are a few credit options for those with a poor credit score.
Lenders are willing to approve the loan application of the borrower that puts up collateral. That’s because it acts as the guarantee that you will repay the loan on time. In the case of a default, the lender can sell the collateral to repay your debt. Collateral helps the lender know that you are serious about borrowing. The common examples of collateral-based loans are home equity loans and cash-secured loans.
While it is the easiest way to get your loan application accepted quickly, you need to be very careful when pledging the collateral as you will be forced out of your home if you fail to repay the debt. The debts backed by collateral are not risky for lenders. In fact, most money lenders do not even request your credit reports when you are willing to put up collateral.
Try Credit Unions
Some credit unions can offer you a loan even if your credit score isn’t good or fair. A credit union is not as big as a corporate bank and they operate on a smaller scale. That’s the reason why these firms discuss the credit requirements with the borrower in-person, instead of accepting or rejecting a loan application based on the three digits. The best part is that the credit unions can pass your loan application at low interest. Still, your best bet is to improve your credit score and then apply for a loan at credit unions and banks.
Get a Credit Card
If you don’t already have a credit card for your monthly expenses, then it is time you considered getting one. Credit card companies accept the applications of borrowers with a fair credit score, but they charge a high APR. But, you will also find companies that offer high credit limits and the 0% intro APR offer, and a sign-up bonus.
If you use a reward or cashback credit card, you can put quite a good amount of your spending back into your wallet. In addition to that, these cards come with a welcome bonus that can earn you up to a thousand dollars. If the credit unions or local banks have declined your loan application, then you must try getting a credit card. It is the easiest way to finance your expenses.
Image: Antonio Guillem/shutterstock.com