How to Get a Personal Loan

It’s common to need a loan to get through tight spots when you don’t have enough cash on hand. Here’s where to find a low interest personal loan.

This could mean to help finance a new house, a new car, student loans or even pay for a vacation. Regardless of what your credit score might be, there are lenders who are willing to help you out with your financial situation.

What is a Bad Credit Loan?

If you’ve taken loans in the past and failed to pay them back or paid them back late, it could hurt your credit score. If you develop a habit of not paying your loans on time it could result in a lower than desirable credit score. Your credit score acts as a guide for lenders to let them know if you’re worthy of another loan or not.

However, it doesn’t mean you can’t have access to loans if you have bad credit. There are lenders whose specialty is to offer loans to those with bad credit.

Rather than focusing solely on your credit score, these lenders will take into account other things like your income and expenses.

As long as you are earning an income (no matter how small) you will likely be able to get some form of loan.

Here are some of the types of loans you might be able to get:

Personal loans

These types of loans are borrowed for personal use. You can get it from banks, online lenders, and credit unions.

You don’t have to provide collateral when applying for a personal loan. Furthermore, if you have a history of delaying payment, your personal loan may have a higher annual percentage interest rate (APR).

Guarantor loans

The guarantor loan is unique because it requires someone to stand in for you and guarantee that you’ll pay back your loan.

A guarantor could be your family member, a friend or whoever agrees to repay your loan if you can’t meet your obligation.

A guarantor loan is based on trust. If you take a loan and fail to pay it back, the lender will try to claim your assets. Should that fail, they’ll contact the guarantor and request payment from them.

For this to work, the guarantor has to sign a contract in agreement that they’ll be held responsible if you fail to pay. In most cases, the guarantor is usually a family member.

Secured loans

Secured loans are loans that are taken with collateral. In this case, you’ll permit the lender to claim your possessions if you fail to pay back your loan.

For instance, you can use your vehicle, house or anything else you own as collateral against the loan.

Many lenders will accept this proposal because they know they’ll be getting something of value if you fail to pay back the loan, which is why they will approve your loan amount.

Peer-to-peer loans

This type of loan allows you to borrow money from others. It usually takes place in a peer-to-peer platform online like Lending Club or Prosper.

An investor will make the loan amount available to you instead of a bank, and in most cases, the terms of the loan are more expensive if you have bad credit.

Before Applying for a Loan

Shop around

Leverage a comparison tool to see all the options available to you. You have to compare deals the same way you do when you’re about to get car insurance or get a new car.

Furthermore, your credit score will not be affected until you apply. So you can rest assured that these comparison tools will not have any impact on you.

Know your credit score

Before you apply for a loan, you need to know your credit score status. This information will give you an idea of the interest rate you’ll have to pay. There are many online platforms which allow you to access your credit score for free.

Consider using a guarantor

Leveraging a guarantor in your loan application will likely get your loan approved quicker at a fantastic rate.

Consolidate your debts

As someone with multiple debts, it is highly recommended that you consolidate your existing debts into a loan that you can pay off quickly.

The Bottom Line

Having a bad credit score doesn’t mean the end of the world. You can still borrow money as long as you’re able to provide a guarantor or offer some collateral against the loan.

Many lenders are willing to work with you despite your bad credit history.

Though, they may limit your loan amount and offer you a high-interest rate. However, see this as an opportunity to recover your financial security and not a setback.