When you are dealing with personal loans, cold and hard numbers matter the most.
If you don’t get the right amount of credit scores, you have limited options open to you when you apply for a personal loan. If you play your cards right, getting a personal loan is not impossible. You can learn more at Match Financial.
Why Are Credit Scores Important?
The whole deal of credit scores confuses many people. This is something you can’t avoid when it comes to getting personal loans.
They developed these credit score programs to gauge if you are worth giving a credit to or not. This is why you should always aim to get a high credit score before applying for a personal loan.
Scoring systems like FICO (Fair Isaac Corporation) score and VantageScore use a series of criteria to get your overall score. The results vary from one program to another.
The criteria are as follows:
- History of payment: 35%
- Credit utilization: 30%
- Credit history length: 15%
- Current credit use: 10%
- Recent credit application: 10%
The program will categorize you into groups based on the set criteria. The classifications are as follows:
- Excellent: 800-850
- Very Good: 740-799
- Good: 670-739
- Fair: 580-669
- Poor: 300-579
If you get a score lower than 640, most creditors will consider you a subprime borrower.
Being a subprime borrower, your chances to get a personal loan are slim. But don’t lose hope. Everyone can get a personal loan with persistence and proper guidance.
Tips To Improve Your Chances Of Getting A Personal Loan
1. Know Your Credit Position
If you don’t know your credit score at the moment, the best thing to do first is to establish a baseline and be in-the-know.
You get one free credit report each year so use that to your advantage. When you finally have your credit score, you can gauge your standing and check your following options.
Make sure to avoid deep credit inquiries into your payment information or state.
2. Find a Co-signer
A co-signer will give your chances a great boost for approval. Make sure that you find a cosigner with a good to excellent credit score that balances your bad credit score.
A co-signer will take half of the responsibility of handling your personal loan and urge your payment. Your co-signer will give your creditors the assurance that you are worth giving a personal loan to.
3. Provide Collateral
Collateral will sweeten the deal for your creditors when they consider your personal loan application. Collateral lowers the risk on the creditor’s end and will give them assurance for the loan.
This will also increase your risk of losing assets if you default on your payments. Make sure to offer collateral you can lose if anything goes wrong or you can’t avoid default.
Read also: How Dafina Went from 6 Figures in Debt to Being a Financially Free Personal Finance Coach
4. Go for a Lower Amount
Asking for lower funding that you can handle and is easy to pay is your best bet when asking from creditors. You will have security when handling smaller debts that you know you can repay in due time.
There is no sense in putting yourself in a financial situation that you can’t handle in the future. Make sure you review your financial standing and forecast so you can decide how much credit you are comfortable handling.
Where Can I Get a Loan on Bad Credit?
Regular Bank Loans
Getting a regular bank loan is hard if you’re working with bad credit scores, but not impossible. The bank will most likely give you a higher interest rate to offset their risk for giving you credit.
You will most likely be asked for more collateral in the process. Weigh your options and your risks long and hard if you push through.
This is very similar to a traditional bank loan except you will be dealing with credit unions or other classes of lenders.
These types of loans are easier to get because you will only be getting a small sum so the risks will be lower. If you’re not looking for much, you will have fewer problems with this option.
Financial Technology lenders are growing in number each day. They are not too concerned with credit scores as much as with your financial track record.
If you want to get in with Fintech, make sure you check their background, services, and lending track record.
Family And Friends
If you have someone in your close circle that is willing to lend you a hand for your time of need, this is your best bet.
Either your family will be too willing to offer you money or they won’t because they know you and all about your bad credit. This option is open for negotiation, so give it a go if you don’t have other options.
Your history of bad credit does not spell doom for your loan options. You just have to make do with whatever options you have and find the best one. Just follow the steps and tips so you will have an easier time.