At some point in your life, you will probably have to take out a loan. However, if you have bad credit, it can seem virtually impossible, especially if you need to get a personal loan. Lenders take a look at your credit history and score and automatically consider you a high-risk borrower.
First and foremost, it’s important to know that, to find a personal loan when you have bad credit, you must do your homework. That includes researching several options and being smart when you ultimately apply for your loan. Here are some tips to get you started.
Obtain Your Credit Reports
Gather up your credit report from each of the three major credit bureaus and take a look at each to ensure that there are no errors and that all information is correct. If you do spot a mistake or something that appears suspicious, immediately report and dispute it. Often, when there are errors in your credit report, it can cause your credit score to take a hit.
Check with Your Bank or Credit Union
When you need a personal loan, it’s a good idea to start with your local bank or credit union. Even if your credit is less than perfect, the financial institution with which you do your banking is more likely to give you a loan than traditional lending institutions. Ask whether your credit score would allow you to qualify for a personal loan.
Online Lenders and Peer-to-Peer Lending
Some online lenders, such as Easy Choice Lenders, are good for receiving personal loans quickly, like when you run into a sudden emergency. Some are very flexible with credit and are willing to extend loans to individuals with no credit history or whose credit isn’t great.
Peer-to-peer lending might be an option for getting a loan when you have bad credit. It is online-based and allows you to borrow money from a person instead of an institution. Borrowers post listings for loans on peer-to-peer websites and include the amount they need and the reason they need a loan. Lenders are known as investors and they review borrowers’ listings and decide which they want to fund. While your credit score still matters, you have a better chance of securing a personal loan because lenders are more lenient and offer interest rates that are generally lower than those of traditional lenders.
Consider Using a Cosigner
One of the most important things in securing a loan is to ensure and prove that you can actually pay it back. As a result, if your credit is bad, you can only benefit if you choose to have someone act as a cosigner. Lenders will look at your proof of income and the cosigner and see you as less of a risk than if you were to go solo to secure a personal loan. However, keep in mind that your cosigner must have a good credit history and score.
Be Wary of Scams
Unfortunately, there are many scam artists online who prey on people to sucker them out of their money. If you encounter a website for a lender that doesn’t care about your credit history, it should be considered a huge red flag and fraudulent. If you research lenders online, always ensure that they are accredited by the Better Business Bureau. You can also contact your state’s Department of Banking or Department of Financial Regulation to check whether a lender is registered to do business in the state.
Another thing that should be considered a red flag is if a lender requires an upfront payment from you before it extends the loan to you. Always avoid providing your social security number or bank information without first receiving legal documentation for a loan. Be smart and you can find the best avenue to getting your loan.