How To Get A Loan If You Have Bad Credit
April 10, 2018
Aside from your monthly income, assets, and savings, another important thing that lenders look at a loan application is credit score.
Your credit rating determines your capability to repay a loan and measures how good you are as a borrower.
With bad credit, banks and lenders will see you a high-risk customer and is, therefore, more likely to reject your loan application. However, there are ways to get a loan even if you have bad credit.
Tips For Getting A Loan With Poor Credit
You will be surprised that some of them are rather more practical and easy.
Submit a Loan Application with a co-signer
When financial institutions like banks and private lenders are giving out loans, they are basically facing the risk of an unpaid loan or an incomplete payment. By having a co-signer on your application, it will lessen the risk for the lender and will give you more chance of approval.
This is because the co-signer, once agreeing to the loan terms, will assume the responsibility of paying back the loan if you default on it.
Apply for Secured Loans
Another way to get a loan if you have a bad credit is to get a secured loan. It is a type of loan that requires collateral, which can be any asset that you own like a car, a house, a boat or a land. With a secured loan, you are pledging the collateral as a security for the lender in case you don’t pay back the loan.
In short, you are giving the permission for your asset to be seized by the bank or lender, and sell it to recover their loss. However, if you feel that you will have no problem with your monthly repayments, then a secured loan is a very good option.
Make use of your Home Equity
Using your home equity, you can apply for home equity loan and home equity line of credit. A home equity loan is a financing product that is based on the difference between your home’s market value and the mortgage value. The loan is taken against your home and therefore doesn’t need a good credit score to be applied for.
On the other hand, a home equity line of credit works like any another credit account. This means that you will have access to a set amount of money anytime you want. The credit limit, however, is based on the value of your home equity. Just make sure to assess your finances well before using your home equity because you will be putting your home at a big risk.
Online Peer-to-peer lending
This is a new form of lending established by some websites that allow borrowers to get a loan directly from registered individuals. With these online platforms, you can post a loan with the amount that you need. If an investor becomes interested in your terms, it will contact you and fund your loan through the online site.
Your credit score is still required upon posting but is less likely to be considered by individual lenders.
Approach the People You Know
This is probably the most practical advice on how to get a loan if you have bad credit. Try borrowing from your family members, relatives or friends. They are more considerate and more likely to lend you money if they have an extra fund on their savings. This, however, will only work if you have been reliable and trustworthy in the past.
If you are able to borrow money from these people that you know, just make sure to pay back the loan as agreed so that you will not damage your good relationship.
These are all good ways to get a bad credit loan or no credit at all. Still, it will not be a waste of time if you try to improve your credit. Doing so will open your access to more loan products and lower interest rates.
Bad Credit Loans
At Money Centre, we understand that you may have made financial mistakes in the past or you may just simply been unlucky. If you are in the market for a bad credit loan, you can apply now or call us on 1300 304 204 to discuss your loan options.