Having a poor credit history can be a great challenge when you want to get a loan. This is because banks and other lending institutions view you as a defaulter and a high risk borrower. Therefore, you may be turned down by major banks until your credit score is raised. However, a poor credit score does not mean that you cannot get a loan. Here are five essential tips that you can follow to get loans with a bad credit report.
Borrow from Friends and Family
You should consider borrowing from family and friends. However, you should ensure that you pay back your debt just as you would pay a bank loan. It is best for you to formalize the entire lending transaction with legal documents. This will help to avoid any future problems as you will all know the interest rates, loan terms and consequences of not repaying the credit.
High interest rates
With a poor credit history, you should know that you will be getting high interest rates for your loans. Lending institutions will see you as a high risk borrower and will try to curb this by offering higher rates for your credit. If you can wait before applying for a loan, then you should take time to build up your credit scores. This will help you get your loans at a lower interest rate because you will have a better credit score.
Choose secured loans
You should always go for secured loans if you have a poor credit history. This is because unsecured debts can be quite expensive for you. If you have trouble being approved for loans, collateral will save you. This is because the lender will know that you are a serious borrower as they will have means of recovering their cash if you default. You can borrow money against your savings, your car or even your home. However, you should evaluate your ability to repay personal loans before using any security.
Having a poor credit score does not mean that you will be treated as an outcast. Therefore, you should ensure that you negotiate with your lenders. Be sure to get several offers on the table before you make your decision. Ask the lenders for a better offer as you might get one who is willing to negotiate with you. This can help you save large amounts of cash in the long run.
Beware of con artists
When looking for credit, you should always be cautious. This is because some lenders might take advantage of your current situation to enrich themselves. These lenders usually target people who desperately need loans because they have very few options at hand. Some lenders may even charge exorbitant fees that will make it impossible for you to get out of debt.
People with bad credit scores can still access loans; however, they are vulnerable to high interest rates from the lenders. Therefore, it is best to protect yourself by being knowledgeable about the lending market. Be sure to know the available credit options for you and the rates and lending terms. This way, you will be able to get credit without further tarnishing your credit history.
James warden is an experienced financial advisor who has been in the lending business for many years. He has built up a good reputation for himself in the industry. James also writes on personal loans in various websites and magazines.