Bad credit is often a result of temporary financial difficulties. The dilemma usually is that the worse your credit, the more your need for financing is. Getting back to good shape financially seems almost impossible with such a proposition. Many people see no light at the end of the debt tunnel they are in, giving up hopes of getting a loan that would help them to organize their finances and to get back on track.
Temporary cash shortages are no problem for people with good credit, as they easily qualify for personal loans with decent rates and terms. However, this may pose a real problem for people with bad credit. Well, if you play your cards just the right way, you may be able to get financing you need. There are a number of things you need to know about applying and qualifying for a loan with bad credit.
1. Lenders consider a number of factors besides your credit score:
Do not get discouraged by your low credit score. Since all lenders are different in terms of underwriting, getting qualified for a loan is a matter of being matched with the right lender.
2. There is a wide array of lending products:
With different lenders operating in the marketplace today, there are multiple loan options to consider even with bad credit, from equity loans to personal loans and cash advances.
3. Having no collateral does not mean the end of the world:
Many people are under an impression that they are only able to qualify for secured loans with bad credit. There are a number of unsecured loans, commonly called signature or no-collateral loans, specifically geared towards people with past credit problems. While they feature higher interest rates, they are a feasible solution to many people in financial need.
4. Consider payday loans as a short-term solution:
Payday loans are great to cover financial gaps for people with steady income. Usually granted for a short periods of time, they allow you to catch up on past due obligations until your next paycheck is due.
5. You have better chances of approval if you have honored your past obligations:
This may sound odd for many bad credit borrowers, but it is true. Your credit history may be ruined just because of late payments or due to a bankruptcy. Lenders will be more willing to approve you for a personal loan if they know that you pay, even if you pay slowly. If they know that you turned your back on lenders who entrusted you with their money, your chances are way lower.
6. Be prepared to prove your identity, income, and residency:
While credit scores may be overlooked by many lenders, they need to know who you are, how to find you, and what means you are going to use to repay the loan. Be prepared to do some paperwork!
7. Shop around before committing to any offer:
Always look around! Many lenders may be willing to get your business, but it is important to get the terms that you are comfortable with. Therefore, look online for as many lenders you may find in order to get the best deal on your next loan.