Sometimes you may encounter major expenses, such as a hospital bill that you can afford to pay for with your savings, and it may be necessary to take on debt. One of the most common financing options is to get a personal loan. However, the lenders will scrutinize your credit report to gauge your risk and ability to repay, and your loan may not be approved if your credit isn’t in great shape.
While you can be patient and work on improving your credit score, some expenses may not wait, and you need to get a loan right away. Fortunately, you can still get a loan with bad credit, and we explain how below.
Get a secured loan
If you are in financial trouble and have poor credit, you may want to get a secured loan. To get a secured loan, you give the lender assurance that you will pay by borrowing against an asset. The asset can be your car, your retirement account savings, home equity, or land.
Car title loans are the most common type of secured loans, as they are quick and convenient to obtain. When you want to borrow against your car, one of the first questions that comes into your mind is how much can I get for a title loan? This will depend on several factors, including the value of your car and the lender you choose.
Note that you risk losing your asset if you are unable to repay your loan. If you decide to take a secured loan, ensure you can make payments in time and that you have the ability to repay the whole amount to avoid losing your asset.
Find a cosigner
A lender can give you a loan even with bad credit if someone else with a high credit rating agrees to cosign your loan. A cosigner is someone who commits to repay your loan if you fail to pay. The benefit of having someone cosign a loan for you is that the interest will be based on their credit score. This improves your chances of getting better terms than you would get when using your own credit rating. If you ask someone to cosign your loan, give them time to think about it, as cosigning can be a big commitment.
Borrow from family and friends
You can borrow from a family member or friend, but just make sure you plan to repay. Failing to repay a personal loan can ruin your finances, but failing to pay back a family member or friend can ruin your relationship. Before borrowing from them, you can set some rules, such as committing to repay with interest, setting the terms, and writing down an enforceable contract.
Join a credit union
If you have failed to get a loan from a traditional lender, you can join a credit union instead. Apart from your credit rating, credit unions consider other factors like where you went to school, where you live, and where you work.
If all the above methods have failed, only then should you consider payday loans. While you can easily acquire a payday loan, they come with high-interest rates, and you can easily be trapped in a cycle of debt if you are not careful.
If you have bad credit, you should take steps to improve it before taking out a personal loan. However, if you need the money right away, you can try these methods, but you should only take a payday loan if the other methods fail.