Most borrowers wonder whether a bad credit score can lead to a loan decline. Those borrowers, who have already hurt their credit score due to their bad financial habits, are usually worried about their chances to get a personal loan. Getting personal loan with bad credit history is tough but possible. Bad credit personal loans will only be approved by your lender if you handle your credit report in a responsible manner. Therefore, it is initially important for a borrower to first concentrate on credit repair and then seek personal loans.
Why are improved credit scores important for getting a personal loan?
Before you apply for a bad credit personal loan, you must perform some act that improves your credit score. Order a free copy of your credit report and check the negative listings on your credit report. Most consumers are not aware of rectifying the errors in their credit report. A credit attorney may help you out with the entire process of repairing your credit. All your credit report mistakes can be rectified and legally corrected under the Fair Credit Reporting Act.
5 Ways a bad credit holder can get private loan
Getting private loans with bad credit is difficult but not impossible. With some effort you can get private loans even with bad credit. So, read the rest of the article to know more.
1. Choose a lender you know personally
Getting private loans is possible from a lender you know personally. Yes! there are many options open for bad credit holder to get private loans such as family, friends, peer to peer lending options. Ask beforehand if they consider bad credit. Try to get all legal documentation from the lender. Thus, you can manage tax or any other legal issues.
2. Go for private student loans
You may gor for private loans which are dedicated for students. This type of loans have favorable terms that you may find suitable for you. Some government based student loan programs are open for borrower with bad credit. Apply for Free Application for Federal Student Aid (FAFSA) to know more about it. You may be lucky enough to get Stafford or Perkins loans.
3. Find a co-signer
Try to find out a person with good credit as a guarantor. The person may be your parent, guardian, friends. The person must takes on the responsibility to pay off the loans unless you fail to make payments.
4. Meet the lender with proper application letter
Try to meet the lender personally with all documentation. Don't forget to bring an application letter written properly. Make sure you have mentioned SSN, total income, savings, expenses. Try to write a flawless letter and explain why you need the loan and how you’re planning to pay off the loan. You need to provide all the necessary documents along with your application. Provide hard copies of employment information housing, tax details, statements for all bank accounts, information of any other loans or debts.
5. Try to improve your credit
Credit repair is the most important step that can help you to get personal loans at an affordable rate. So try to improve your credit score as much as possible.
3 Secrets to improve your credit score before applying for a personal loan
1. Get a guaranteed credit card
Since the students have rarely borrowed money, they have a poor credit history where they haven’t done any financial transaction. You can get a guaranteed credit card and start using it responsibly and also make timely and regular payments on it. A series of timely repayments will certainly boost your credit score.
2. Limit your charges to 30% of the card’s limit
Most financial experts say that you can certainly boost your score by limiting your credit card charges to 30% of the card’s limit. The total credit utilization is an important determinant of credit score.
3. Restrain your credit applications
While repairing your credit, make sure you do not go on applying for further lines of credit. Restrain the usage of your credit cards as you’re already going through tough financial circumstances.
Bottom lines
You should work hard to get approval on your private loans. As a bad credit holder you may get rejection on your loan application. But don’t panic or disheartened. Try to ask the reason and request politely if there is any chance to get approval.