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Just because your credit score is not in the best shape doesn’t mean you can no longer get a loan. Whilst it is true that getting a credit hinges a lot on your credit score, there are still lenders who may be happy to let you borrow money despite yours being bad. All you need to do is look for lenders who can help you secure a bad credit personal loan.
Things To Consider Before Applying for Personal Loans
When used and managed responsibly, you can use this personal loan to build your credit history and even improve your credit score. Here are things you can do in order to get approved for a small bad credit personal loan.
Know your credit score
The reason why your credit score is very important is that it determines your creditworthiness. How much your loan will be charged will also be dependent on your credit rating. If your need for extra cash is not that urgent ad you know that your credit score is bad, it makes sense to try and work on it first, improve it. This way, you can get better loan offers.
Prove you can afford the loan
In the light of you not having a good credit score, you’ll have to convince the lender that you can afford the amount that they will lend you. In this case, you need to provide them with proof of income. It helps when you have a regular-paying job and provide them with payslips or whatever documentation to prove that you are earning enough every month to afford the repayments.
Consider which loan type would suit you best
Typically, personal loans are unsecured. Since your credit is low, if a lender will allow you to take out an unsecured loan, expect that the rates are going to be very high. This is because they’ll have to consider the risks of you possibly not being able to pay the loan back.
You can also choose to go for a secured loan. This is where you present collateral in order to get approved. How much you’ll be allowed to borrow would also depend on the value of the collateral. You might get better interest rates too when there’s security involved.
Lenders and organizations earn their profits on interest rates and fees, that is why lenders are more than happy to lend you a huge loan because it usually has a long payment term, which means higher interest and more profit. Provided of course that you get approved.
And that is one of the reasons why small personal loans aren’t so prevalent. But worry not, there are still lenders and place where you can get small loans for your needs. Here are the different places where you can get a small personal loan.
Being a non-profit-organization, unions are the best place to get small personal loans. Their sole focus is to help the community, resulting in competitive rates, and are more than willing to approve your applications. Even without perfect credit, all you need is an income to qualify.
Credit Unions are also a good alternative for payday loans. They are more than happy to help you avoid getting payday loans, which people usually turn to when in need of small loans.
Borrowing online is easy and convenient, and is a great place to look for low-cost loans. They usually don’t follow the norm and come up with some creative ways to evaluate borrowers. They care little about your not-so-perfect credit scores but look at your income instead.
Good thing about online lenders are that they have fixed rates, and no prepayment penalties. And on top of that, offer borrower-friendly loans.
Depending on how “small” the amount you want to borrow is, national banks can be a good option for small loans. Although banks tend to require you to take out a couple of thousand dollars, if you have the income and the credit score to back it up, it may be more convenient and inexpensive to borrow from them, especially if you have an account already open with them.
But if not, banks also offer credit cards. This allows you to borrow as little as you want- just make sure to pay what you spent every month. But if you do keep a balance on the card, you’d have to pay for interest.
Friends and Family
Out of all the things listed here, it’s the easiest but the riskiest of all, not in terms of money, but the risk of straining or ruining your relationship. Be perfectly clear when discussing the terms, or better yet, formalize the loan and draft a written agreement with the complete details.
Once you have everything completed, we send you the payment directly to your checking account. It would only take a couple of minutes for it to reflect on your account. You may use it for online or offline purchases.