Borrowing money when your credit score is low can feel very frustrating, but it doesn’t have to be an impossible thing to do. You can take the right approach and find lenders who are willing to work with you and choose options that fit your budget and your affordability levels.
Tools like Squared Money to compare secured loans can help, but they’re only one part of the process. The key is firstly to understand your choices and take the right steps to improve your overall financial picture. Let’s take a look at how you can borrow money when you have a weaker than average credit score.
- Start by drawing down your credit profile. Before you can start applying for loans, it’s important to know exactly where you stand. You can get a copy of your credit report from the major credit bureaus and look for any errors, old accounts and defaults that you could have fixed. Sometimes it’s simple mistakes like a payment marked late when it wasn’t that can drag your score right down. If you correct these problems, that can give you a small boost and help you to qualify for better terms. But just make sure that you know that you need to wait a little while before you start applying.
- Find a bad credit lender. Plenty of traditional banks prefer borrowers with high credit scores, but there are lenders who specialize in helping people with less than perfect credit. Online lenders, credit unions, and community financial institutions often provide more flexible options that you could benefit from. When you compare offers, look at interest rates, repayment periods and fees because even if your credit is poor, you should still avoid loans with extremely high interest rates. Because you’re just going to dig yourself another hole.
- Consider a guarantor. A guarantor or a cosigner is someone who has strong credit and is willing to sign on to the loan with you. It can make a big difference to your application. They basically promise the lender that they’ll repay the loan if you can’t. Because this reduces the lender’s risk. You may get approved more easily and qualify for better rates, but remember that this is a huge responsibility for both of you if you don’t make repayments. It affects not just your credit, but your cosigners will.
- Take a look at the secured loan options. If you own something valuable, such as a car, savings account, or even a house, you might be able to use it as collateral for a secured loan. Be very careful with this because while they are often easy to get with poor credit, the lender has something to fall back on if you can’t repay, which means you could risk losing whatever you used as collateral. Only borrow what you can realistically handle.
Poor credit doesn’t have to mean that you’re out of options, and with some patience and planning you’ll be able to find a loan and a lender that meets your needs without putting yourself at risk.
