Bad credit can seem like a prison from which thereâs no escape. After all, your credit score plays a major role in many financial transactions, especially personal loans.
Fortunately, having poor credit doesnât mean you have to give up on your goals. But can you get a personal loan with bad credit? Yes. In this PDS blog, we take a realistic look at how to get a personal loan with bad credit.
The Importance of Good Credit When Applying for Personal Loans
Itâs only natural if youâve ever asked yourself, âHow can I get a personal loan with bad credit?â Potential lenders look at your credit score to judge whether youâre a worthy risk to loan money.
The closer your score is to the maximum of 850, the safer you are in the eyes of lenders. Your excellent track record earns you not only loan approval but also favorable interest rates.
Conversely, the farther you move away from 850 the lower your chances of getting top rates. Once your score lands in the low 600s, you will struggle to find anyone willing to risk a loan. However, donât give up. Thereâs still a possibility of getting the money you need.
How to Get a Personal Loan with Bad Credit
On your way to receiving a personal loan, you should educate yourself on the type of loan most suitable for your situation, the least desirable loans, and what you can do to improve your odds of having your application approved.
Where Can I Get a Personal Loan With Bad Credit?: Unsecured Personal Loans
An unsecured loan is the primary type of personal loan. It doesn’t require collateral but demands regular employment that provides a reasonable salary and allows you to manage your debt load.
These loans use credit scores to grade your trustworthiness, so you can expect lenders to offer only loans with high interest rates. Also, you should accept the fact that you may only qualify for a smaller loan than desired.
Types of Loans and Resources to Avoid
Desperation may cause you to consider accepting money from lenders with predatory practices. They take advantage of financially strapped people when they can least afford it.
Payday Loans
One type of loan to avoid is a payday loan. They’re tempting because they often are available without a credit check. You just need verifiable employment.
The repayment arrangements usually have a fast turnaround time, with a deadline only two weeks or less after receiving your money. An even bigger shock, meanwhile, is the interest rate, which can be several times more than the actual loan amount.
Title Loans
Title loans also have short repayment periods and exorbitant interest rates. They also ignore your credit history. Instead, they require collateral in the form of your automobile title. Miss your deadline, and you could lose your transportation.
How to Improve Credit and Improve Your Chances of Getting a Personal Loan
Before you apply for a personal loan, take some practical steps to boost your rating. They’re simple but you shouldn’t underestimate their potential impact.
Closely inspect your credit report, looking for errors that can cost you several points. Then, immediately request that the credit bureaus correct their mistakes.
Try to reduce your credit card balances to at least 30% of their credit limit. You can also better your credit report by bringing your accounts up to date and then regularly paying your bills on time.
Can I Get a Personal Loan With Bad Credit?
Having bad credit can cause severe financial difficulties, but it doesn’t mean you can never qualify for a personal loan. You just have to be comfortable with the higher interest rate and willing to accept a smaller loan amount from legitimate lenders. Meanwhile, continue to improve your credit score by paying your bills on time and lowering your outstanding debt.
More questions about your credit score or debt relief options?
