If you have a bad credit score, it can be hard to get approved for a loan. Having bad credit can make it harder for lenders to trust you when it comes to paying them back. A personal loan can be a great way to pay for emergency expenses and consolidate debt. If you are wanting to get a loan with bad credit, you may think you have no choices available to you.
How Is Bad Credit Determined?
Every American has a credit file that’s compiled by one of the three major credit agencies: Equifax, Experian and TransUnion. These reports are used to create a credit score that helps to determine if you’re a risky borrower. A score of 580 or lower is considered bad. It’s usually based on a variety of factors, such as your history of late payments and your debt-to-income ratios. Credit scores can range from 300 to 850.
How to Get Loans With Bad Credit
When you are in the market for a new loan, you will want to take a few steps before applying. Below are some steps to consider to get the best deal available based on your credit.
Check Your Credit Reports and Score
Before you apply for a loan, make sure that you thoroughly check your credit reports and score. Your score helps lenders determine if you are a good candidate for a loan. This step is important because your score will be a big factor in determining personal loans rates that are offered by lenders.
You’re entitled to a free copy of each of your credit reports from the three major credit agencies every year. With this information, you’ll be able to see exactly what your credit score is and identify any negative marks on it. If you have any issues with your report, you must contact the credit agencies to fix them.
Shop Around With Different Lenders
Although a poor credit score will not get you approved for the best rates and terms, it’s still important to shop around for the best deal. If you have a good relationship with a local bank or credit union, it can help boost your credit score. Having a steady track record of paying off your debts and keeping a positive balance can help boost it. Online lenders are known to offer loans to people with poor credit scores. Some of these companies offer low-interest rates and flexible terms.
Do Your Research
Before you apply for a loan, make sure that the company you’re considering is legitimate. Doing your research will help ensure that it’s not a scam. If the company you’re considering is not one that you’re familiar with, make sure that it has been investigated by the appropriate authorities. Also, make sure that the company has the necessary licenses to operate in your state.
Best Type of Loan To Get With Bad Credit
There are many options for people who want a loan but have bad credit. The best option is a personal loan. This type of loan allows you to borrow a specific amount of funds and pay it back in monthly installments. According to Lantern by SoFi, “A personal loan is a fixed-amount loan that’s distributed as a lump sum. Many people take out personal loans to make a large purchase, pay off medical bills or consolidate debt.”
Just because you have bad credit, it doesn’t mean you have no loan options available to you. The key is doing some research and finding a lender willing to work with you.