Is bad credit a reason to give up on getting a loan? No, it is not if you are about to take an unsecured personal loan. You can get no options when you need a mortgage as that is usually a big deal demanding at least tens of thousands of dollars, but if you have no collateral and you only need less than couple of thousands of dollars you are likely to get those. However, there will be a limited number of options available for you.
Approval Upon High Interest
When you have a good credit history there are many banks fighting against each other to offer you very attractive conditions for long or short term debts. However, if you have bad debts and low income there are no options you can state to be attractive. If you manage to get funds you’ll have to pay much more as the interest rate will be high.
You are likely to get your responses rejected in banks, so you will have to consider offers from peer-to-peer lenders or credit unions. Be ready to pay 6%-15% of annual interest rate (depends on the sum and how bad your credit history is).
Co-Signer As an Alternative
Co-signer is someone who agrees to pay off your debt if you won’t manage to do that. Usually co-signer is your relative or spouse, however, you can involve anyone who will agree. With a good co-signer you can even get a loan on good terms in the bank.
There are only two conditions your co-signer has to qualify – good credit history and high income. However, you should know that after person has co-signed, one’s options for borrowing get limited as bank considers that in case of your failure to pay off the debt the payments are to be deducted from co-signer.
So this option should only be used in case of emergency or if you have no other option to take a loan that can change your life – a student loan for example.
Predatory Lending Companies
This is the last option to get to. These companies are specialized in lending “bad” borrowers and thus they offer really tough terms with high interest rates and strict paydays. It is okay for a predatory lending company to offer up to 30-40% annual interest loan – which means that you are likely to pay more for this interest. And to be clear the fees for missing the payday could be enormous.
So if you want to save your wallet you can only turn to such companies if you are desperate, however, it is better to make sure you really do not have other options as although these organizations are not so serious like banks – you still have to pay.
If you do not need money desperately right the best option for you will be to improve your credit history to be able to get a loan with better terms in a bank.
How to Improve Your Credit History?
It is rather easy, but it may take time. There is no option you will manage to do that in a month, but you can cope with it in 6 months. So there are three easy ways to improve credit history:
- pay off old debts (or restructure those)
- honor household bills on time
- take tiny loans and pay on time
Pay Off Old Debts
Old debts that weren’t paid off is the best option to ruin your credit report. So even if you cannot pay it off visit the lender’s office and negotiate loan restructuring. Loan restructuring means the lender will decrease the interest rate, or he can prolong the payment term so your monthly payments will decrease instead. It is a standard procedure and lenders usually prefer to agree on it as it takes much more funds and time to get money through the court.
Honor Household Bills on Time
One of the reason your credit history can be spoilt is your household bills being services poorly. Make sure you manage to meet the payday deadline for at least several months and your credit history will be improved.
Take Tiny Loans and Pay on Time
Even the sum of loan is insignificant bank will notice that you are making payments on time, thus, you will gain more trust from the lender. Although you may not need the tiny loans and you will lose some on it, it may be useful if the sum you really want to borrow is large especially if the only alternative left is the predatory lending company.
Never let your credit report to get ruined, but if you did – you should know that you still have some options and the way out from the tough situation.