5 Ways To Get A Loan When You Have Bad Credit

Articles

If you are in a financial bind and need a loan to tide you over, but also have bad credit, you may be feeling a bit hopeless. After all, banks seem to be pickier than ever these days about who they'll issue loans to. Banks tend to consider those with bad credit as too high-risk when it comes to issuing personal loans. While you work to repair your credit, however, you do have loan options. Here are five ways to get a loan when you have bad credit:

Apply for a Peer-to-Peer Loan

Peer-to-peer loans are a relatively recent innovation in personal loans. Rather than borrow money from a bank, you post a profile and ask for a loan from an individual. Interest rates tend to be reasonable, and while these individual lenders do check your credit score, they are sometimes swayed by your personal story and circumstances, making them a better bet than banks. This guide to all the major peer-to-peer lenders is a good place to get started.

Get a Car Equity Loan

If you own your vehicle outright, you may be able to get a car equity loan. A car equity loan works by using your car's value as loan collateral. Car equity loans can be a good option for those who own a vehicle but have bad credit, as they do not typically take your credit score into account.

Try a Home Equity Line of Credit

Similar to a car equity loan, if you own your home, you may qualify for a home equity line of credit. These loans are based on how much equity you currently have in your home and tend to have reasonable interest rates. Your bank is a good place to start with a home equity line of credit, as banks sometimes extend more favorable line of credit conditions to existing customers.

Consider Borrowing From Family (With Caveats)

Depending on your unique circumstances, borrowing from a family member or close friend may be a good option for you. Your family member or friend will most likely not run a credit check and will instead be motivated by their desire to help you out in a financially difficult time.

Do remember, however, that this is a loan and needs to be repaid on time,preferably with interest. Doing so will ensure that the loan does not negatively impact your relationship with your family member and will help them continue to trust you and perhaps be willing to help you out again in the future. Ideally, you will set up a legal contract for the loan, to help reassure the person lending you the money that you are serious about paying it back and to avoid potential problems. Here's an easy-to-use template for a loan contract.

Ask Someone to Co-sign

If you know that you will be able to make the payments on time, and a parent, romantic partner or other person in your life has good credit and is willing to help you out, consider asking them to co-sign on a personal loan. When someone co-signs a loan, their credit score is considered equally with yours, making it easier to get approved for a loan as long as their credit score is high.

Be careful with this option though, since your co-signer will be on the hook for any missed payments in the future. Your relationship could become strained if you miss payments and therefore lower your co-signer's formerly pristine credit.

Repairing your credit will provide you with more financial options, but in the meantime, one of these five loan solutions should be able to help you out.

Share

12 August 2015

Know Your Options when Financing a New Business

When I began my first business selling sports equipment locally, I knew the sports-world well, and I knew how to run a business. One thing I did not know a lot about was the financial world. I had never applied for a loan in my life other than when I financed my car with the dealership in-house financing. My first application at a large bank was denied. I began looking into my other options, and I found that there were more lenders for new businesses than I realized. I applied at local credit unions, local banks, and other business lending services. I was able to secure more funding than I even expected, and my credit is just average. I created this blog to help other new business owners realize that there is funding out there. You just have to find it and apply! Don't give up on your dream.