If you have bad credit, you may worry about being disqualified from getting access to credit. This isn’t a black and white issue thankfully, and there are many lenders willing to work with people dealing with bad credit. However, there are also predatory lenders hoping to tempt those who believe they will not be able to get a loan elsewhere so it’s always best to go into your search with a high guard and keep in mind if something seems too good to be true…it probably is.
Don’t be afraid to shop around with banks both big and small. You just might find a better deal and customer service with a more local bank than the big names, even with a bad credit. A local Denver mortgage broker might provide that better rate than a big bank like Chase or Wells Fargo despite them having many locations.
What to do if you have bad credit
Good loan conditions for bad credit are difficult to come by and you’ll find your options significantly more limited. After all a poor credit score negatively affects your chances of qualification and every single lender has access to this data that can very easily ‘blacklist’ you.
It’s important to always read the terms and conditions of any loan while you consider your options. Take your time, and be sure you know what to look for in a lender. The application process for a loan will be the same, no matter your credit rating. However, there may be restrictions on what you can borrow, and you may be offered tighter repayment terms than a more ‘trusted’ borrower.
Choosing how much to borrow
If you have bad credit, it’s likely that the amount you can borrow will be restricted. It’s a good idea to work out exactly how much you need to borrow before you begin your search. This will make it easier for you to rule out lenders that won’t offer what you need.
Some lenders will allow you to apply for a personal loan online, which is perfect if you don’t have the time to wait to hear back from a lender if you qualify or not. Many online lenders can provide instant approval so you can get access to the money you need as quickly as possible.
Improving your credit score with a loan
The right loan (correctly managed) can have some boosting effects to your credit score provided you pay it back on time and in full. Small loans can be much easier to secure with bad credit, and are easier to repay as well. You can use this ‘stepping stone’ approach to slowly rebuild your credit profile and trust level – although be aware that you should be using such loans sparingly as constantly needing access to credit is another red flag that can damage your credit score more than help it, even if paid back within the agreed terms.
To make your loan easier to manage, it’s best to get one with a low APR (annual percentage rate). The APR tells you how much interest your loan will accumulate, and a high APR can make it difficult to pay back your loan. However, by taking out a small loan over a short period of time, you can avoid having to pay too much interest. Make sure you read and understand the APR before you choose your loan, and look for lenders who will offer you a good interest rate, even if you have bad credit. You can learn more about the full definition of APR and how it works here
No matter what, always have a plan in place to repay your loan before you even finish your loan application. If you fall behind on your loan repayments, you could soon end up with a worse credit score than when you started.