Anyone who finds themselves with multiple balances on high-interest credit cards may want to consider looking into a bad credit personal loan. This allows them to transfer those balances and take advantage of a lower interest rate to pay off their cards. Unfortunately, many banks will turn you down because of your credit. Fortunately, there are ways to get a loan that will help you save money, even with a low credit score.
Whether it’s due to financial problems, job loss, or simply trying to build a good credit score as a first-time user, it’s hard to get a loan. The way credit reports work is always changing, and there are many factors that affect a person’s credit. It is important to stay informed on how to build it and what your options are. There are probably more options than you think. Here are some ways to apply for and get a personal loan with bad credit.
How to get a loan with bad credit
Having zero credit or bad credit is a major problem when looking to secure a loan, because that person is seen as a high-risk customer who may default. It is important to accept that until one’s credit score is raised, one will not be able to enjoy the standard lending guidelines offered by big banks.
For anyone who’s been turned down for a loan or doesn’t want to pay monster rates, here are a few options:
Consider a Home Equity Line of Credit
If there is enough equity in your own home, it is possible to obtain a low-interest, tax-deductible loan or line of credit that can be used in any way. The only downside is that many don’t want to tap into their home equity, as it puts the property at risk if they can’t afford it. However, with a steady income and a little discipline, this can be paid off and is a less expensive option no matter your credit score.
Try and apply to credit unions
Credit unions are much better than a regular bank. That’s because they are owned by members. They are usually founded by people who have something in common, be it living in the same area or working in the same profession. They are non-profit and have the sole purpose of helping members. They offer excellent customer service and low fees.
borrow from a friend
Consider what is called peer-to-peer or P2P lending. There are even sites online that allow a person to borrow from someone directly instead of a bank. This form of loan is becoming very popular and it is quite simple. It’s a win-win situation for both investors who want to earn interest and borrowers who enjoy paying lower rates. It is the perfect solution when looking to apply for a personal loan with bad credit. Current rates with P2P loans are as low as 6%. That’s much lower than most credit cards.
Family Loans
If an online partner doesn’t respond to a loan application, there’s always a chance a family member will. However, it is more than important to treat a loan from someone in the family as a professional loan. It must be documented and recorded. A written agreement must show the interest rate, payment terms, and collateral backing the loan. You must also set out all the actions to be taken if the borrower defaults.
What about a co-signer?
If you’re looking for a bad credit personal loan and don’t have a family member or friend available to offer you the loan, you might consider co-signing. This is when someone who is confident that the borrower can repay the debt would take a chance and be a backup to repay the loan in the event that person defaults.
