While getting a personal loan with a bad credit score is possible, it may call for some extra legwork from you. The entire process varies depending on the lender and your specific score. Here are some general steps you can follow to boost your chances of approval.
Check Your Credit Score and Reports
Before looking for the best lender, the first step is to check your credit score online. This can be through your credit card provider or a credit-providing website. Federal law grants you access to a free credit report copy every 12 months from leading credit-reporting bureaus. These are Experian, Equifax, and Transunion.
A detailed look at your credit behavior for the previous years will help you determine whether you can qualify for a loan. It is also a perfect time to highlight any errors and inaccuracies in your credit score, such as a debt you didn’t take, and request corrections.
Evaluate Your Budget
If you are already dealing with bad credit, you should avoid taking a loan you can’t afford, as it will only worsen your credit score. Consider using a personal loan calculator to generate monthly loan repayment estimates and review your budget accordingly. If the repayments are on the higher side, opt for other options for getting money, like borrowing from a friend or family.
Take time to compare bad credit loans from credit unions, local banks, and online lenders. Although a bad credit score may not earn you the best terms and rates, that’s not always true. You may get a better deal with online lenders, like e-transfer payday loans, as most use alternative criteria like your job, education, and banking history to evaluate applications. In turn, you can easily be eligible for an affordable loan even when your credit is less-than-stellar.
Through loan prequalification, you will determine the loan amount, terms, and rates you qualify for with a particular lender without a hard credit check. The process often involves a soft credit check which differs from submitting a complete application.
Contact potential lenders to inquire if they allow prequalification for a personal loan. This will enable you to assess various loan options without numerous hard credit inquiries. Some lenders have made it easy to complete the process online in only a few clicks. While at it, remember to check the loan terms, interest rates, origination fees, prepayment penalties, and other fees charged by the lender.
Add a Co-signer Where Necessary
A co-signer acts as the second person on the loan and agrees to repay it if you fail to do so. This lowers the risk you pose to the lender. If you have difficulty qualifying for a loan or need to boost your application to get better terms, consider including a co-signer with a better credit score and credit history. Confirm with the lender if they permit co-signers.
Submit an Application
Gather the documents required for the loan application in time to speed up the process and submit the application online or in person. The documents may include:
- The personal contact information like address and social security number
- Financial statements
- Recent pay stubs
- W-2 forms
- Mortgage statements
Some lenders may request additional documents. So, prepare yourself to provide those extra requests as quickly as possible. You may receive a response the same day or the following day after submitting your application.
Thanks to the widespread adoption of online services, you can get a loan any day, any time. Just find the best lender, get prequalified, and apply for a loan amount you can comfortably pay back.