Personal loans – take out loans even with a bad credit line
Many lenders tell you that credit scores are not important when applying for a loan. However, this is not necessarily true. The truth is that, when getting personal loans and you have no credit or bad scores, there is a problem, though it is not impossible to navigate.
Bad credit lines hinder your progress in getting a loan, because it makes you a major risk to lenders. Traditional financial institutions such as banks and credit unions tend to have very strict standards when it comes to lending money, using credit scores to calculate the terms of the loan and selection of borrowers. When your credit score is bad, you feel you are at the mercy of payday loans because they offer you money as long as you can pay it at high interest rates. However, these leave you at greater debt amounts because of their mostly predatory terms.
Note: While we present personal loans as a possible solution, we are not in any way affiliates of any lenders, their agents or representatives. We do not take applications, neither do we give out loans or make credit decisions. We will instead provide you with the service that connects to one of the lenders in our network, but we are not responsible for the actions or decisions of any lender.
What are some warning signs of bad credit?
The best place to understand your credit options is your credit score. This is an understated fact, since not many people check their credit scores regularly. Here are some signs of bad credit scores:
- Your checking account is overdrawn on a regular basis
- You pay higher interest rates than advertised
- You recently go through foreclosures, eviction or forced repossession
- You regularly pay your bills late, like utilities and housing
- Cell phone companies refuse to give you contracts
- You have challenges getting leases for housing
- You do not pay down debt, instead making only minimal payments on high interest cards
These things will have negative effects on your score and make it harder to get loans. Here is an easy guide that can assist you to know your standing.
- 700+ – The highest rating you can get. This is an excellent rating for both unsecured and secured loans.
- 680- 699 – a good score, and you will not have many problems in applying.
- 620 – 680 – this is fair/average, and you are largely safe.
- 580 – 620 – is workable, though you will pay higher rates if you fall below 620 (which is like the ‘cutoff’ point for prime loans).
- 500 – 580 – you can get funds, but you will need to provide extra details when requested.
- Below 500 – you can still get funds, though you will need to give extra details to the lender.
Best places to get loans even with bad scores
Using home equity credit lines
When you have enough equity, you can acquire tax-deductible, low-interest line of credit that you can spend in any way you want. It gets even better when you have a reliable source of income and have discipline about paying an equity line, but it remains an affordable choice.
Exploring peer-to-peer loans
These are online platforms, which permit direct borrowing to individuals instead of institutions. In addition, it has a more streamlined process that offers benefits to both borrowers (low interest rates) and investors (high interest rates).
There are platforms for the investors where you can place your application, and this becomes a part of your listing. These platforms include SoFi, Prosper and Peerform.
Applying to credit unions
Credit unions are similar to banks, but are a better choice when it comes to interest rates. This is mostly due to their lack of shareholders in most cases, and their members own them. These members all have something in common, for instance living in the same area. They have benefits like lower fees, though the drawback is you must be a member to apply for loans.
Enlisting a co-signer
This is a risky option, but it still works in some cases. A co-signer is another individual, usually a close friend or family member of yours who agrees to repay your loan in case you default in payments. Not all lenders accept co-signers, so ensure to confirm if this is the case.
Asking for help from family or friends
This option does not require you to have high credit scores, but do not use this to ruin the trust you have. Agree on the terms and make sure to pay on time.
Getting a personal loan is challenging, especially when you have a bad credit score. Most financiers will not accept such cases. However, you can explore other options, making the most out of the situation.