Anyone finding themselves with multiple high-interest credit card balances may want to consider looking into a bad credit personal loan. This allows them to transfer those balances and take advantage of a lower interest rate to pay off their cards. Unfortunately, many banks will turn you down due to your credit. Fortunately, there are ways to get a loan that will help you save money, even with a low credit score.
Whether due to financial problems, job loss, or simply trying to build a good credit score as a first-time user, getting a loan is difficult. The way credit reports work is always changing and there are many factors that affect a person’s credit. It’s important to stay informed on how to build it and what your options are. There are probably more options than you think. Here are some ways to apply for and get a bad credit personal loan.
How to get a loan with bad credit
Having zero credit or bad credit is a major issue when looking to secure a loan, because that person is seen as a high-risk customer who may default. It is important to accept that until your credit score is raised, you will not be able to enjoy the standard lending guidelines offered by the big banks.
For anyone who’s been turned down for a loan or doesn’t want to pay monster fees, here are some options:
Consider a Home Equity Line of Credit
If you have enough equity in your home, you may be able to get a low-interest, tax-deductible loan or line of credit that can be used in any way. The only downside is that many don’t want to take advantage of their home equity, as it puts the property in jeopardy if they can’t afford it. However, with a steady income and a little discipline, this can pay for itself and is a less expensive option regardless of credit score.
Try and apply to credit unions
Credit unions are much better than a regular bank. That’s because they are owned by the members. They are usually founded by people who have something in common, whether they live in the same area or work in the same profession. They are non-profit and have the sole purpose of helping members. They offer excellent customer service and low fees.
borrow from a friend
Consider what is called P2P or peer-to-peer lending. There are even online sites that allow a person to borrow from someone directly instead of a bank. This form of loan is becoming very popular and is quite simple. It’s a win-win situation for both investors who want to earn interest and borrowers who enjoy paying lower rates. It is the perfect solution when looking to apply for a personal loan with bad credit. Current rates with P2P loans are as low as 6%. That’s much lower than most credit cards.
Family Loans
If an online colleague doesn’t respond to a loan request, there’s always the chance that a family member will. However, it is more than important to treat a loan from someone in the family as a professional loan. It must be documented and registered. A written agreement must show the interest rate, payment terms, and collateral backing the loan. You must also set out all the actions to be taken if the borrower defaults.
What about a co-signer?
If you are looking for a bad credit personal loan and don’t have a family member or friend who is available to offer you the loan, you might consider co-signing. This is when someone who is confident that the borrower can repay the debt would take a risk and be a backup to repay the loan in the event that person defaults.