Bad credit can seem like the end of your financial life. It means you’ll have a harder time getting a mortgage, and it can impact your job prospects. A bad credit score can limit where you can live since landlords routinely use them to decide whether to accept you.
All that can make knowing how to get a personal loan with bad credit seem like magic. The people who manage to do it are like wizards, breaking the rules of reality for their own advantage. In reality, though, those people aren’t any different from you.
The only advantage they have is the fact that they may know more about finances and how they work. They could only learn so much by reading about it, so keep reading below! You’ll learn five ways you can beat the odds and boost your chances of getting a personal loan with bad credit!
- Use Equity As Collateral
Just like any kind of loan, vendors want to be assured that they won’t lose out if you miss payments. Giving people money is always a risk as to whether or not they’ll pay it back. Your job is to mitigate as much of that risk as possible so the lender will be more likely to work with you.
One of the ways to do that is by offering to put up collateral. When you offer something as collateral, you’re saying that the lender can take is repayment for the loan if they miss out on paying it. This can include your car, your home, or anything worth more than a certain amount.
It doesn’t mean you can just repay your loan with your collateral, though. If you still have a balance on your loan after giving up your collateral, you are still responsible for paying it back. Items can lose value over time, or the bank may sell them for less than they’re worth.
Make sure you only put up something you’re willing to lose and make sure it will hold its value. You never know when you may need to fall back on it. And if your item holds its value well, the lender may be more willing to agree to give you a personal loan.
- The Future Is Now With P2P Lending
Personal loans are loans people can use for almost any reason. Since they can be used for almost any reason, banks are usually hesitant to hand them out. They may charge higher interest rates than other kinds of loans or may refuse to give them out to people with bad credit.
You don’t have to go to a bank, though. The future is here with peer-to-peer lending systems.
With a peer-to-peer lender, you’re not working with an organization like a bank. Instead, you work with a website which connects you with individuals willing to give people loans. The website manages the terms of the loan and keeps track of payments.
Individuals are generally more willing than banks to give personal loans to people with bad credit. However, they’re also not bound by the same kinds of laws banks are. Expect higher interest rates or some shady practices if you decide to take a loan out with a peer-to-peer system.
These systems also aren’t legal everywhere, because they’re so new. You may be ineligible for getting a loan this way simply because it isn’t allowed in your state.
- Sign Onto Getting A Cosigner
One way to assuage scared lenders is to get a cosigner to sign onto your loan with you. Cosigners vouch that you will uphold your end of the deal and make all the payments you need to. And if you can’t, they will be held responsible for the remaining balance.
Cosigning onto a loan can be a huge responsibility for the person you ask to do it. Their credit isn’t impacted just because a person cosigns a loan. Yet, the results of the loan they sign onto may hurt or help their score. If the loan ends up defaulting, it may tank their credit, but a paid-off loan may lift it.
Lenders may also not be fully convinced just because you find a cosigner. They will want to look at your cosigners credit score, verify that they’re employed, and look at their income. They treat cosigners just like they would someone who applies for a loan.
If they find something they don’t like with your cosigner, they may still reject you for a personal loan. So choose your cosigner carefully, and to protect your relationship with them, pay your loan off on time.
- People Are Here To Help You
Sometimes, you may not need a digital lending system or a bank to find a loan. Instead, you may have people in your life you can count on when you need money in a pinch. It’s better to avoid banks altogether if you have a family you can call on for help.
Personal loans from friends and family won’t impact your credit, and chances are your credit won’t matter. They have a better judge of your character than a lender will ever be able to get. However, taking out a loan this way can also be risky.
Getting personal loans from family and friends mixes finances and personal relationships. It can tank your relationship with the person, so you have to decide if it’s worth it to ask for a loan.
- Specify The Reason You Need A Personal Loan
One f the lenders are shy about giving personal loans to people with bad credit is because they can be used for many reasons. It helps to calm their nervousness if you specify the reason you need a loan, beforehand. Knowing the reason can also help the lender come up with a payment plan that works for both of you.
They may also suggest a different kind of loan that will work better for you. To learn more about different kinds of loans that may help you, look at this topic.
It’s Hard To Get A Personal Loan With Bad Credit
There’s an art to knowing how to get a personal loan with bad credit. It takes skill, and most of all, knowledge. You have to deeply understand your own chances of getting a loan, and understand what a lender expects out of people. Nobody will ever just hand you a loan if you have bad credit, you have to work for it.
Sometimes though, you may not even need a loan in the first place. Read this to learn how you can make money online and find more financial stability than a loan can ever give you.