How to get a loan with bad credit

How to get a loan with bad credit

Are you worried about being blacklisted and unable to apply for a loan due to credit issues? Read below to view solutions and learn more about loans

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What Is Bad Credit?

Bad credit is generally considered a FICO score below 670, which falls in the fair or poor credit ranges. Your credit score is a three-digit number, typically between 300 and 850, that predicts how likely you are to repay a debt based on information from your credit reports.

FICO and VantageScore are two popular credit scoring models. But FICO scores are the most widely used credit scores, with 90% of top U.S. lenders relying on them to measure credit risk, according to FICO.

Common reasons for bad credit can include making late payments, defaulting on loans and having debts in collection, among others.

Where to Get a Personal Loan With Bad Credit

If you have a bad credit score, you may want to focus your search for a personal loan on a few types of lenders, including:

Online lenders. Some of these lenders specialize in bad credit loans. Check eligibility requirements, including credit score, income and debt-to-income ratio.

Credit unions. They can have more flexible lending requirements than banks, making approval for a personal loan easier even with bad credit.

Smaller lenders, such as community banks. Having a relationship with a local bank or credit union can help with approval. Many of these lenders also offer credit-builder loans if you have no credit or limited credit and want to improve your score.

What to Do If You're Denied for a Personal Loan

If your application for a personal loan is turned down, do not give up. Instead, try to learn why your loan was rejected and what you can do to fix that problem.

Also, consider moving on and applying with another lender. Each lender has its own criteria, including a minimum credit score, for determining eligibility, which means you might be more successful with some lenders than others.

If you continue to struggle, you might want to tweak your approach even further. You could try:

Rethinking your loan amount.

Asking for only what you need rather than the largest amount might help.

Applying with a co-signer or collateral.

Either one can strengthen your application.

Putting a personal loan on hold.

You may want to pause and work on improving your credit score by paying down debt, for example.

Alternatives to Personal Loans for Bad Credit

A personal loan is not your only option for fast access to cash if you have bad credit. You might consider these choices, depending on your financial situation:

Secured personal loan. The lender requires collateral, such as a car or savings account, to guarantee the loan. This can help you qualify more easily and for better terms than traditional unsecured personal loans, but you risk losing your collateral if you default.

Credit card.

Look into a new card to pay some of your bills. You can find cards for bad credit or secured credit cards. Aim to cover all or most of your balance to avoid paying interest.

Family loan.

Make sure the terms are clear to avoid ruining a relationship.

Home equity loan or line of credit.

If you have a home with equity you can tap, you might consider one of these loans. The risk is that the loan is secured by your home, and you could lose it if you can't keep up with payments.