In times of financial uncertainty, there may be unforeseen circumstances where you need an urgent loan. However, it can be an uphill task for one who need a loan with bad credit. Borrowing may come with high interest rates and options are limited. One is also viewed as a high risk customer who is likely to default on the payments. Hence, many traditional big banks do not lend unless the credit score reaches the minimum guidelines. As you struggle to build credit, I can suggest some tips to find a good loan to get funded.
Before you embark on the journey for a good loan, the first thing you will need to do is to change your mind-set. While having poor credit can be a major stumbling block, the term ‘bad credit’ may mean different things for different lenders. Some lenders may turn you away but do not feel discourages as some other lenders may be willing to lend. Other than reputable lenders like the banks and Peer to peer (P2P) lenders, credit unions are also great sources to look at when you are applying for a loan. As they are smaller than normal banks, they are more willing to offer you a loan with bad credit, assessing you personally rather than just looking at the loan application as well as the credit score.
With the proliferation of internet usage, P2P is an online platform that has been growing in popularity in recent years. Many people have jumped on to the bandwagon of using P2P due to its convenience. It allows you to borrow directly from individuals rather than an institution. It offers a win-win situation for borrowers paying low interest rates and investors who earn good interest rates. Though the applicants are screened with their credit score, individual investors may be more empathetic to your situation.
Another useful tip is to use collateral for the loan. When you pledge something of value, this shows the lender that you are serious about the loan and ready to commit to it in a responsible manner. The lender is more likely to feel assured that he will have a higher chance of collecting the money. Most people use their equity in their home and borrow against it.
If all else fails, seek your family or friends for help. To avoid complications, it is best to treat the loan like a serious business transaction even though you may be borrowing from your best friend. The loan should be legally recorded and clearly documented with a written agreement. Settle on an agreed interest rate so that the loan benefits everyone. The last thing you want is to risk a close relationship go sour due to any misunderstanding over money issues.
Though it may require some time to get a loan with bad credit, it will be well worth the effort when you eventually get your loan approved. Be wary of the pitfalls and high fees as some lenders take advantage of people who are looking for loans with bad credit.