When you have bad credit, getting a loan might seem impossible. There are, however, some things you can do to get a loan with bad credit.
How to Get a Loan With Bad Credit
Bad credit isn’t the end of the world. When you need to borrow money and you have a less than perfect credit score, these tips can help:
1. Check your credit first
Before applying for a loan, learn where you stand credit-wise.
Check your credit reports and your credit scores to understand where you land in the bad credit category. And what is a bad credit score?
According to Equifax, this would be a score of 560 or below.
2. Assess what’s hurting your score most
While reviewing your credit report and scores, consider what’s dragging your score down. Late payments, for instance, can be a score-killer, as can carrying high balances on your credit cards.
You can counteract the negative impacts by making paying your bills on time a priority and paying down the balances on your credit cards. Also, look for mistakes or errors on your credit report.
If you find an error, you can dispute it. Having an error removed or corrected could help raise your score slightly.
3. Compare rates from different lenders
Shop around with different lenders to see what kind of interest rate and loan terms you may qualify for. This can help you eliminate lenders that don’t accommodate bad credit borrowers.
Use caution with no credit check lenders. While bad credit won’t keep you from getting a loan, they can charge significantly higher interest rates.
4. Consider a secured loan
Secured loans require some type of collateral, such as cash held in a bank account or a vehicle you own. This gives the lender some reassurance that you’ll pay back what you owe so you don’t lose your collateral.
Read more: Learn What is a Good Credit Score in Canada
The catch is that if you don’t repay the loan, the lender gets to keep your collateral. So when choosing a secured loan, make sure the payments fit your budget.
5. Ask someone to cosign
A cosigner can help you get a loan with bad credit if they have a strong credit history. The lender takes your credit history and your cosigner’s into account for loan approval.
That means the cosigner is equally responsible for the debt. If you don’t pay it back, then both your credit scores could suffer. Similar to getting a secured loan with bad credit, make sure you can afford to repay a loan that has a cosigner so you don’t cause them credit damage.
6. Play up your strengths
You may have bad credit but you could offset that with a strong work history, a solid income and a history of managing your bank account responsibly.
When trying to get a loan with bad credit, focus on the positives. Lenders may be willing to approve you for a loan, despite bad credit, if they see that you have the means and the willingness to pay it back.
Birchwood Credit Solutions, for instance, can make getting a loan with bad credit less stressful. At Birchwood, we work with borrowers from every type of financial situation and look beyond just credit scores for loan approvals.
If you need a loan to purchase a new or used car, consider in-house financing offered by Birchwood Credit Solutions. We are equipped to approve bad credit car financing if you’ve been denied by another lender. Call today or apply online to get the process started.