It is not a great feeling when you get turned down for a loan but even when you understand why lenders might be reluctant to help out because of bad credit, there are still some worthwhile options available that could see you getting your hands on the cash you need.
Here is a look at how to get a loan when your credit score is bad, including an overview of what bad credit means and how to check your score, plus a tip on how to apply without spoiling your chances, and some other borrowing options to consider.
Under no illusions
It is always a good idea to possess a healthy dose of realism when you are trying to get a loan with bad credit, as it has to be said getting accepted is often difficult but by no means impossible.
Checking through King of Kash details, for example, you will notice that there are lenders who charge a higher loan rate in line with the potential risk they are taking with their money, but they don’t run your details through what you would class as a traditional credit check.
As long as you understand that if your credit profile is not that great at the present time you have fewer options open to you and the loans are going to be more expensive, you can avoid wasting time making applications that aren’t likely to succeed and focus more on borrowing wisely based on what is available to you.
A positive point to consider is that if you take out a loan and repay it within the agreed terms, this will help boost your credit profile and should make it easier to borrow next time you need some money.
Find out where you stand
If you are having problems getting a loan it would be a good idea to check how bad your credit report actually looks when lenders access your records.
It is not uncommon to find some errors on your credit report, so it is a good idea anyway to check and see that all the information looks accurate as far as you are concerned.
Another point to remember is that what might be deemed as “bad credit” by some lenders might not be viewed so unfavorably by other lenders, who might be willing to accept you as a customer.
Don’t spoil your chances
Lenders don’t just take your payment performance into account when deciding whether to give you a loan or not.
If you keep making applications because you are getting turned down for a loan each time you apply it is highly likely that you will be spoiling your chances of being granted a loan. The reason for this is that if a lender sees you making new loan applications every month, they could draw the conclusion that you are not managing your money very well and could be too much of a risk of defaulting on the loan.
The best way to avoid this scenario is to make all your applications in a short space of time. This makes it look more like you are shopping around for the best rates rather than looking increasingly desperate because you keep getting declined.
Credit union could get you started
Your credit score is constantly evolving and if you are committed to improving your standing and becoming a better proposition, time is a great healer.
You can work on strategies to improve your profile such as making sure you pay all of your current bills on time every month. In the meantime, another loan option to consider would be to approach a local credit union.
Credit unions are often willing to work with people who currently have bad credit and they normally take a much more personal approach to lending. This means that rather than lending based on your credit profile and basing their decision purely on numbers, they will take into account your personal circumstances and treat your loan application on its own merits.
Friends and family option
If your credit profile is really bad right now and you only have a few limited and possibly unpalatable lending options open to you, it might be an idea to see if friends or family are willing to back you.
If they agree to lend you the money, it could be the opportunity to put your finances back on track so that next time you apply for a loan the answer will be yes rather than no.
Ethan Butler is a personal finance consultant who knows how to squeeze money out of unexpected places and get your cash flow in the green again.