When you have bad credit, it means that you will have to pay more for the loan. The theory is simple but it is not something that will last forever. This means that you always have the chance to build up the score before getting a loan. It may sound and takes time, but there is always a way to make up the credit score.
- Peer-to-peer loans – Peer-to-peer loan is a relatively new method to get a loan. This type of loan allows borrowers with bad credit score to borrow money from individual lenders through websites. Even though it is relatively easy, but the peer-to-peer loan is still considered unsecured.
- Secured loans – Similar to home equity loans, the secure loan allows you to get a loan and put something as collateral. In simple, the loan is secured by valuable assets such as home, cars, and so on. Getting this type of loan is relatively easy to get for someone with a bad credit score.
- Loan from family or friend – Getting a personal loan from someone close to you should be the last option. This loan does not consider your credit score, but it may put the personal relationship at risk especially if you fail to pay back the loan. Sometimes, people get too ashamed to ask for their close persons for a loan. However, before agreeing on this type of loan, it is important to have written proof for of the loan such as the interest charged, amount of loan, number of payment, and duration of the loan. Doing this will help prevent the damaged relationship, hurt feeling, and even legal action. Make sure to only borrow money from the loved one when you can pay back the loan on time and in full.
Credit score may be one out of many factors that loan lenders consider before giving loans out. Loan lenders may also look deep in your credit history before deciding whether you are eligible to receive a loan or not. The credit history checking is not a pleasant process but loan lenders need to know the risk for lending money to the borrower.
The thing is not all people have a good credit score. Some of them have bad credit and they find it difficult to get a loan. It is an undeniable truth that loan lenders tend to judge people from the credit score. However, people with bad credit score still have the chance to get a loan. Find out the step below.
Understand anything related to your credit score
Before applying for any loan, it is important to know your credit score because the lenders know it as well. That three-digit credit score plays a huge role whether you are eligible to receive the loan or not. There are several ways to find out your credit score such as ask your bank or go online.
After knowing the credit score, you need to understand what the score means. Well, loan credit score consists of three digit numbers. The credit score determines the interest rate for every loan. For example, people with a credit score of more than 720 usually pay 11 percent interest rate. People with subprime usually pay 29 percent interest rate. However, conventional lenders will not offer any loan at all for people with a score of less than 550.