You may have heard horror stories about applying for loans with bad credit. Plenty of people will tell you that it is not possible to get a personal or business loan for bad credit, but this is not actually true.
While there may be fewer options available to you, and the terms available may not be ideal, there are loan options for people with bad credit. In fact, if you are prepared, you will be able to avoid some of the expensive traps that are around for people with bad credit, and be able to borrow wisely.
How Bad is Your Credit Really?
Don’t just accept your bad credit at face value. If you’ve been told that you have bad credit, make sure to verify it. It is not impossible for your credit reports to contain errors. Get hold of those reports and go through them carefully. Dispute the errors. This may make a significant difference to your credit score.
Also, keep in mind that different creditors have different requirements. What may be considered bad credit to one creditor, may be acceptable for a loan with another creditor. Don’t get disheartened by one negative response. Always shop around, but make sure you’re smart about how you do it. Send all your applications around the same time so it doesn’t seem like you’re looking for a new loan every month which will further impact your credit score.
Start off by applying only to reputable and traditional lenders, such as banks, credit unions or reputable online lenders before you turn to lenders that specifically offer personal or business loans for bad credit.
Options for Loans with Bad Credit
If you need a personal or business loan for bad credit, all is not lost. Banks have the most stringent requirements for approval, but there are other reputable lenders that may be prepared to work with you to find a solutions that is suitable.
- Credit Unions – Credit Unions are generally smaller than major banks and there is more chance that they will take other factors into account and not just your credit score when deciding whether to approve a loan for you. You are more likely to get personal service where you can explain your needs and how you will manage the loan.
- Online Lenders – There are more and more online lenders available today who will consider offering a loan to an applicant with bad credit. This is a trend that has become more popular and it means there are more loan opportunities available for people with bad credit.
- P2P Lenders – Peer to peer lenders provide loans from individuals, rather than from organizations. While they won’t give a loan to anyone, they are more likely to consider each individual situation and it is more likely you will find someone who is sympathetic to your cause.
The Bottom Line
While there are more opportunities than there used to be for people with bad credit to get loans, it doesn’t mean you shouldn’t be careful. Make sure the terms are worthwhile and you are not being taken advantage of.