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How to Get Bad Credit Loans
By Robert Banks
If you have a bad credit history, you will know that getting a loan is not going to be an easy task. Not every lender will grant loans to people with bad credit. In fact, most banks, credit unions, and mortgage services will not even consider loan applications unless you have above average credit score. After all, a person with bad credit most likely have a history of missed or late payments. However, there are quite a few good tricks and useful tips that will make the entire process of getting a loan easier for you.
Your Credit Score
The term credit score usually refers to your FICO score, a number based on a formula
developed by the Fair Isaac Corporation. Fair Isaac looks at a summary of all your
credit accounts and payment history. FICO scores range from 300 to 850, and Fair
Isaac calculates them for each of the three big credit-
If there are any errors, there are simple ways to have them removed. Sometimes it is as simple as calling the creditor that reported the bad information or you just need to write a letter challenging the error. Either way, removing errors in your credit report is the fastest way to improving your credit score. Do not forget, your credit score is what determines your credit worthiness to the lenders. If lenders consider you as a high risk customer, then they will be less likely to grant you the loan. So you need to establish a good credit score.
If your credit score is bad but not below 580, you can still get a good interest rate from a legitimate lender. So the trick here is to improve your score a little and then apply for the loan. There are numerous ways which you can improve your credit score. The first and the most important way is to pay off all your bills on time. If you can show that your most recent payment history is good, despite past credit problems, many lenders will give you credit. Making a sincere effort to manage your credit responsibly will help to raise your credit score over time and bring about a great improvement in your credit score quickly.
Another way is to pay off your debts rather than moving it from one credit card to another. Most people assume that moving the debt from one credit card to another will give them a better interest rate and improve their chances of paying off the debt. But the debt keeps piling on and it further degrades your credit score. If you close multiple credit accounts in a short time period, it will cause your credit score to go down further. Even if you close a lot of your existing credit accounts, it will still harm your credit score. So use these tips to improve your credit score.
Secured Loans
If you have a bad credit history or bad credit score then more lenders will be comfortable to give you a secured loan rather than an unsecured personal loan. A secured loan technically has much better terms and conditions as compared to an unsecured personal loan. The term period for the loan can be much higher, the interest rates can be much lower, the eligibility criteria is less stringent and even the amount you borrow can be much higher. The only downside is, in secured loans you have to pledge your home as security. In case you defer from the payments, you may lose your home as well.
The reason the lenders prefer lending you a secured loan is because they consider you to be a high risk customer. If they have your house as security or collateral, then the risk is significantly reduced. If you default on the loan, the lender can sell the house to make up for the loss. If your bad credit is directly related to lower income, making steep loan payments on time can be tremendously difficult. With a house on the line, getting too far behind on the loan can come at a very high cost. Thus you need to think very carefully before agreeing to a secured loan. On the other hand if you are willing to pay on time, then you will definitely prefer the secured loan.
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