I think we both agree that last year was a tough year. A global pandemic wreaked havoc across the globe and led to many people losing their jobs and businesses As a result, they were unable to pay their mortgages and settle their credit card payments. This led to a bad credit score. Maybe you were a victim of the above-mentioned issues and you need to get a personal loan.
Also, it could be that you have a bad credit score due to other reasons and you are wondering how to get a loan since most financial institutions will check your score before deciding whether to offer you a loan. If you are in such a predicament, then I will detail some of the steps I took to get a personal loan while having a bad credit score.
If you have a bad credit score, be careful about the lenders you approach since scammers and shady companies want to pray on your desperation. One red flag I assess for is companies that are more than willing to offer me a loan even before you apply. Some of these lenders will either charge me exorbitant interest rates or use my financial information for fraud.
Also, avoid title loan and payday loan lenders. They are predatory lenders and target people like me who have limited loan and credit options. Though they will give me the loan, they will charge me astronomical interest rates. I might end up paying up to 30 times more in interest. Instead, try to find an alternative. If you are a veteran, check to see if you have the minimum credit score for va loan since this most likely will have a better interest rate than a payday loan.
If you have a good relationship with a financial institution, now is the time to capitalize on the relationship. They might be willing to offer you a loan even with a bad credit score. This tactic may not work with a large national bank (like in my case). However, this might also be an indicator that you need to assess your banking needs and look for financial institutions that have products that match those needs.
In my case, smaller banks and credit unions were more willing to work with me to get a loan. The only downside is that credit unions had some requirements that I had to meet. For instance, I had to be a member, and my location determined my membership. Other credit unions may need membership based on your employer or other criteria. This might look daunting, but some of the criteria are easy to meet, whereas some requirements have a workaround. But, the first step is to know what the requirements are. You can use credit union reporting tools to compare different ones until you find which is the most suitable for you.
When I had a low credit score, I urgently needed a loan to settle a hospital bill, and my bank was unwilling to lend it to me without getting a co-signer. I talked to my brother and he agreed to be my co-signer. This option is risky since it makes the co-signer liable to paying your loan should you default on it. I advise you to discuss all the loan details with the co-signer before, read through the loan agreement terms and the co-signer’s conditions. Once the co-signer is okay with all the details, they will make an informed decision when co-signing for you.
Instead of borrowing from a traditional financial institution, you can use a peer-to-peer lending service. Peer-to-peer lenders connect borrowers and investors who lend out money. The terms of the loan vary, but you receive a lending decision in a short time. Although peer-to-peer lenders might still need my credit history and I have to pass a credit check, they may be more accommodating compared to banks.
Steer clear of payday loans and instead explore some payday alternative loans (PAL) offered by credit unions. These are small loans of between two hundred to a thousand dollars and you have a payment period of between one to six months. I once took a payday alternative loan and I got $800 at 25% interest. The interest was high, but at least I was able to get a loan and I did not fall victim to a payday lender.
If you have a bad credit score and you need a loan, then the above tips will help you out.