Looking for a personal loan might be the only solution when money woes strike; however, getting a personal loan can be challenging if you have bad credit. Luckily, you can find a very bad credit loan direct lender online who is willing to work with you.
How can I get a good loan when I have bad credit?
When you have bad credit, it can be hard to get an unsecured personal loan that comes with good terms, but it is possible. People who need a personal loan but have shaky credit should do the following:
Look to very bad-credit lenders
Many lenders online are willing to give you a personal loan, even when you have poor credit ratings. Find the right lender online that offers a rate you can afford. The best thing about a bad credit personal loan is that it is easy to get approved. Most lenders will fund your application on the same day.
Improve your financial health
Break bad habits to maintain or raise your credit score. You can start by building your credit file; you can do it by opening new accounts that will get reported to all the major credit bureaus, as most lenders report to these credit bureaus. You cannot start laying down an excellent track record as a borrower if there are no accounts in your name. So you might want to have several active credit accounts.
Essentially, these could be secured cards or credit-builder loans if you are just starting out or already have a low score. Alternatively, if you know someone who uses their card responsibly, you could get yourself added as an authorized user to their credit card.
Because your payment history is one of the factors that determine your credit scores, trying to pay your loans on time is the best way to improve them. Make sure you do not miss your credit card or loan payments by over 29 days to avoid getting reported to the credit bureaus, as this will hurt your credit scores.
Even if you are not behind on your bills, when you have a high balance on your revolving credit account, this can result in a high utilization rate. In turn, this can hurt your credit scores. Maintaining a low balance on your revolving accounts relative to their credit limit is a great way to improve your scores. People with the highest credit scores always ensure their credit utilization ratio is in the low single digits.
While the specific steps you can follow to improve your credit score depending on your unique credit situation, these are some of the general steps that can help your credit. Keep in mind that there is no set timeline to rebuild your credit. The time it will take to improve your credit scores will depend on what is hurting it and the steps you will take to rebuild it.
Show that you’ve got a consistent source of income
If you’re still rebuilding your credit score and waiting for it to catch up, but your financial situation has improved, try to show your lender that you can repay the loan. Provide evidence of reliable and consistent income, as this will give your lender peace of mind knowing that you will have resources available to help make your payments on time. Evidence of income can include signed letters from employers, pay stubs, and monthly bank statements. If you are self-employed, you can provide bank deposits or tax returns.
Get a shorter loan term
By choosing a shorter repayment period, you might get a better rate. Essentially, the shorter your repayment period, the lower the interest rate you’ll enjoy. Expect higher rates when taking a loan with a 5-or-7-year term and lower interest rates when taking a personal loan with 2-to-3-year repayment terms.
Minimum credit score for getting a personal loan
When it comes to setting the credit score for approving a personal loan, each bad credit loan direct lender has its unique criteria. When you are thinking about subprime borrowing, 680 should be considered near-prime. That means you might not qualify for a loan at this point. To access a personal loan with ease, you should have a score of approximately 700, but not at the best rates. You need scores of at least 750 to qualify for the best terms.
Lenders often look beyond your credit score to determine if you can repay your loan. These include savings, assets, and earnings. Overall, a lender wants to gauge how well you pay back the money you borrow before giving you a personal loan.
When choosing a lender, consider your eligibility for a bad credit loan. While you will have to provide your financial documents to get approved for a personal loan, you should be prepared for a hard credit check. Most lenders do not perform hard credit checks on people with bad credit, but you can often still get a loan with low-interest rates. You can also ask about the fees and other terms associated with bad credit loans.