Bharat SainiLast Updated on May 15, 2019 by Bharat Saini
Applying for loans is par for the course in the contemporary financial landscape. It’s perfectly normal to seek loans since it doesn’t always suggest that the borrower is in a dire financial situation. Nevertheless, loans by and large assist companies and individuals in their crunch time.
There are metrics through which loan amounts are calculated and approved. If we particularly talk about personal loans, then there are credit score bands that actually guide lenders regarding the financial stability of borrowers. If you have a score below 600 and you are aware of it, then you would also know that it is considered poor credit score, which means it’s quite difficult to apply for a loan in a conventional sense.
Usually, lending companies don’t even consider the applications from the borrowers having credit score 580 and below and they have their reasons. It has been found out that around 60% of bad creditors become delinquent in the repayment of the loans and that’s why their score drops further. This is a solid reason for any lending company to reject a loan application.
It is pretty clear that people with bad credit scores are in a bad spot and it is obviously not easy for them to ask for a loan on their own terms. So, what’s the way forward? What people with bad credit scores should do to secure a personal loan in the time of need?
If you are one of those unlucky people who has landed in bad credit score zone for any reason, rest assured, there are some ways through which you can steer out of this tight spot and get a personal loan. Let’s have a look at the tips that can help you with personal loans even when you are not doing that good with your credit score.
Improve Your Credit Score
It goes without saying that there is no way around a good credit score if you want to keep getting loans of your chosen amount and on low-interest rates. So, you have to improve your credit score as a long term goal. If you are lurking somewhere 570-580, then you just need 20-30 points to get in the safe zone. That’s not much work.
Start paying your withstanding dues. Pay your current bills on time and try to clear your existing line of credits. Getting a secured credit card can also help you in improving your score. If you can wait for the loan, then it is the soundest strategy: rebuild your credit score.
Not only it will expand your borrowing options, but you will also be able to improve your credit score along the line.
Go to Bad Credit Lenders
If you don’t have time to wait for the improvement in your credit score, then you can start getting the quotes from lenders that extend their help to all those who are struggling with their credit scores. There are many reliable lending companies that facilitate borrowers with bad credit scores.
They offer a small amount in loans with reasonable markups that can be repaid on easy installments. For instance, this short-term option is for all those people who are facing the double whammy of urgency and bad credit rating. Such companies offer loans that help people with their short-term financial entanglements.
Get a Co-Signer on Board
If you want an amount that is unconditionally available on good credit score only, then there is a way to secure it. Get a person with good credit score (co-signer) on board. It could be any of your friend or a close family member. A co-signer actually assures the lending entity that he/she will be liable for the repayments if the borrower defaults. It is important to mention here that not every lending company facilities the co-signer enlistment.
So, first search all the potential lending companies that offer loans for co-signer enlistments and also review their peculiar conditions.
Spouse Income to the Rescue
To secure certain types of loans, one needs to fulfill the minimum income requirements. But if you are already struggling with a bad credit score, then there are strong chances that it might also be difficult for you to meet the income criteria. In such instances, there are some lenders that accept spouse incomes on loan applications.
Apply for a Secured Loan
For many people with credit scores way below 580, secured loans become the last resort. Truth to be told, secured loans petrify people. The thought of losing any of your hard earned asset or account as the collateral is not comforting from any aspect. However, there are some inevitable situations where one doesn’t have any other option. Nonetheless, try to reduce the risks associated with secured loans. First of all, if you are positive that you can repay the loan on agreed conditions, then you don’t have to worry about any collateral loss.
Moreover, try to get only those secured loans where you can use a certificate of deposits or retirement plans as collaterals. It won’t be wise to use your home equity or car equity as the collateral. Try to avoid those high-risk secured loan agreements as much as possible.
Ask for Reconsideration
Yes, you can ask the lending companies to reconsider your loan application. It is entirely legal. However, you must have solid reasons to put in the application of reconsideration. For instance, try to highlight all the highs from your past financial history (diligent payment of rents, utility bills, etc). You can also show that you will be able to repay the borrowed money with your existing income. Reconsideration is always a long shot, but there is no harm in giving it a try.
While you are desperately looking for loans at a bad credit score, it is important to avoid getting caught in the net of predatory lenders. Packages such as advance-fee loans and car title loans will not only make it difficult for you to improve your credit score, but it will also make it impossible for you to repay the loan.
