There are many, many reasons why you might find yourself in a situation where you need some extra funds. You might be trying to purchase property, pay off debts, or invest in a new business enterprise. No matter the reason, you might need the assistance of a money lender.
Millions of Americans take out loans every year. These loans can help you weather difficult times or take advantage of great opportunities. However, it can be very difficult to successfully take home a loan if you have a poor credit background. Lenders are often risk-averse, and a less than stellar profile might be enough to get you turned away.
What should you do? In this situation, it is essential that you know how to apply for a loan with poor credit.
Your bad credit doesn’t have to be a dead-end. Read on and we’ll walk you through what you need to know.
Why Bad Credit Can Sink Your Lending Options
Why is a poor credit score such a big deal? If you’re not familiar with money lending practices, you might not understand what all the big fuss is about as it pertains to your credit score.
The fact of the matter is, your credit score is the main facet money lenders look at when deciding whether or not to loan you cash.
This is because your credit score is the common signifier of your reliability as a borrower. If you have a poor credit score, it means one of two things. Either you’ve borrowed money and failed to pay it back in a timely fashion in the past, or you’ve never really borrowed money at all.
To most lenders, being untested is just as bad as being a poor borrower.
Moneylenders are risk-averse. They want to ensure that when they give away their money, they’ll see it back in due time. This is why they want to take a look at your credit score, and only want to loan money to those who seem the most reliable.
Credit scores are provided by companies such as FICO and range from 300 to 850. You can access your score via these companies or often through your credit provider.
Generally speaking, any score below 700 is considered to be poor, while a stellar score would be anything between 700 and 850.
Some lenders, such as large banking institutions, won’t do business with people who have poor credit. This can make it feel like there’s no one you can turn to. This can be scary, especially if you have many good reasons to take a loan out.
Do Your Research & Homework
Finding a lender who is willing to work with you certainly isn’t impossible, no matter what your credit score is. You will need to put in a little bit of work, however.
First and foremost, you’ll need to make sure you understand the profile you’re bringing forward. Most Americans don’t know their credit scores. If you’re in this boat, it’s time to change this.
After all, if you don’t know what your score is you won’t know who to consider talking to!
Request them from the various credit reporting companies to ensure you’ve seen what the lenders you’re planning on speaking with will see.
You’ll need to prepare some other paperwork as well. Make sure you have proof of income and employment, your social security number, identification of some sort, and housing information on hand.
These are the common documents that lenders will request, and you don’t want to waste time by having to hunt them down later.
With all of this information together, you’ll have a good sense of what your profile looks like. Now the task at hand will be to find a few lenders who seem open to working with people like you.
Look up various lenders and compare what they’re willing to offer. Many lenders who are willing to work with poor credit borrowers will advertise this fact, so they shouldn’t be hard to find.
If you have questions, reach out and start a conversation with these lenders. However, don’t apply for more than one loan at a time.
What to Consider When Taking a Loan
More likely than not, money lenders who accept poor credit borrowers will take other steps to mitigate their risk. It’s important to understand what to look for when accepting a loan.
Many private lenders will offer loans with higher interest rates to those with poor credit. So while you’ll be able to get the money you need, you’ll have to pay a higher price for it as you pay it back then someone with better credit might.
Other private lenders might offer what are known as secured loans. This is a loan that requires you to tie a personal asset, such as your car or home, to the loan. If you aren’t able to pay back the loan, the lender has a right to seize your property.
In this situation, your personal assets are providing a contingency that your credit score isn’t able to.
It’s important to take the time to understand the terms of a loan before signing anything.
How To Apply for a Loan With Poor Credit
No one ever seems to have as much money as they need.
In these situations, it’s essential to know how to apply for a loan with poor credit. Understanding the process will allow you to get the funds you need even if your borrowing background isn’t picture-perfect.
Have more questions about poor credit loans? Give us a call for assistance.