Do you have a low credit score but need financial assistance
fast? Though most banks may not approve your application, you can still obtain
a loan from other sources. Bad credit loans are also referred to as personal
loans and come in handy during financial difficulties. You can use such a loan
to repair your vehicle, pay for hospital bills, or even consolidate your debt.

Just like any other personal loan, you pay back a bad credit
loan in monthly installments. You need to compare the different sources of such
loans so that you can choose one that offers flexible eligibility requirements
and affordable interest
rates. Before we discuss some of the options available, here is a brief
explanation of a credit score.

What is considered a
bad credit score?

These are numbers that are used to gauge the ability of a
borrower to repay a loan. Credit scores often start from 300- 850. Banks often
assume that if you have a high credit score, the chances of you repaying the
loan are higher than a person with a poor credit score. Anything that is below
650 is considered a poor credit rating. Such borrowers are taken as high risk
and are often subjected to high-interest rates if they choose a loan from a
conventional bank.

Every lender, however, has its unique definition of bad and
good credit scores. This means that you have to explore more if your rating is
not very high so that you work with a reasonable lender. Bad credit scores tend
to have a direct impact on borrowing. Those with excellent scores tend to
receive loans with very low-interest rates from big financial institutions such
as banks.

How can you get a
loan when your credit score is wanting?

If you don’t have an emergency, you should start working on
boosting your credit score. This makes it easy for you to afford the loan in
the future. For you to boost your credit score, start by making relevant
changes such as making all your payments on time. You can also work on your
credit cards by ensuring that you minimize their balances and avoid going
beyond normal credit limits. Avoid applying for new credit as you work on
boosting your score since this can have a negative impact.

When you have an emergency, however, you may not have enough
time to boost your credit score. In this case, one of your options would be
sitting down with a loan officer so that you can convince them of your
creditworthiness. Before you attend such an interview, ensure that you organize
all the relevant documents such as tax returns, information regarding your job
history, and bank statements.

Where to get a bad
credit loan

Some of the options you can consider are discussed as
follows:

You can get a bad credit loan from a community-based credit
union. Such associations may look beyond your credit score and judge your ability to
pay back based on your character. One that is affiliated with your job can also
consider you for a bad credit loan. Most of the credit unions charge an
interest rate of about 18% to all borrowers. If you got a similar loan from a
traditional bank, you would incur interest of up to 36%. This is a clear
indicator that credit unions can save you a lot of money at the end of your
payment period.

Most of the credit unions are also on the lookout for
borrowers. You only need to afford the terms that are in line with your credit
history for you to qualify for a bad credit score from them. If you are part of
the armed forces, you should consider particular credit unions that are
designed for such members for you to enjoy certain benefits.

• Borrow
  from your friends or family

When your credit score is not the best, one of the best
options you should not disregard is borrowing from a loved one. Though it can
put your relationship with them at risk, it is easier for you to get approved
for the loan compared to other options. A friend may not subject you to a
stressful qualifying process since they already know your character. They may
also charge you a considerable interest rate compared to borrowing from a bank.

Regardless of having a relationship with them, you should
treat this loan application just like the same way you would work with a
stranger. It should be formalized with documentation to avoid any disputes in
the future. Ensure that you sign a written contract that outlines how you
should pay the loan, as well as the interest rates attached to it.

Technology has made it possible for people to borrow bad
credit loans from online direct lenders. By choosing a lender such as Cashfloat, you would enjoy fast loan
application, and approval since the lender determines if you qualify for the
loan or not in minutes. You should expect to receive your funds within a few
hours after application. Though direct lenders do not focus so much on your
credit score, factors such as your employment history may be considered.

You can also get a bad credit loan from a group of
individuals instead of an institution. If you prefer this option, look for a peer to
peer website and give details regarding the amount you intend to apply for
and the purpose of the loan. Investors on such sites go through loan listings
from time to time and select the borrowers they would like to fund. Borrowers
who choose this option find the lending terms more lenient than borrowing from
individual financial institutions. You can also enjoy low-interest rates from
this option.

Conclusion

Though every borrower is encouraged to work on their credit
scores, you still have options to borrow from when your rating is low. Ensure
you understand the risks involved from borrowing from each option before you
sign any documents.

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