A bad credit score should not hinder you from getting that personal loan to take care of an emergency or consolidate your debts.
However, you have to put in a lot of work to qualify for these loans, especially if you don’t have a credit history.
Here are a few steps you should consider to get a personal loan with bad credit.
Improve Your Financial Health
If you’re not taking a loan to respond to an emergency, then begin by improving your credit score. This will enable you to afford the loan that you want.
Improve your creditworthiness by paying your bills on time. Ensure the balance on your credit cards is less than 30 percent.
After that, don’t apply for any new credit. The combination of these factors, ranging from on-time payment, no new credit to low credit utilization, will account for 75 percent of your credit score. You’ll not be at 100 percent yet, so you need to move to the next step.
Check Your Credit Score
Lenders have a minimum credit score requirement, so they can reject your application if you have a lower score than their minimum. Also, you’ll find lenders who see it as a business opportunity to offer you a bad credit loan. These bad credit loans come with a higher origination fee and interest rate.
You’re entitled to access one free credit report. So take advantage of that and check your credit report from AnnualCreditReport.com.
Although the report won’t include your credit score, you can still purchase it from the credit bureau or get it free from some financial institutions. If you find any error in your report, get it fixed to improve your creditworthiness.
Get Loan Pre-Qualification
Many personal loan lenders would want you to submit a prequalification before contacting a personal loan Montreal lender.
Prequalification allows the lenders to find out if you can qualify for a loan. They’ll also see if they can offer you a loan without hurting your credit. So take this as an advantage before you apply for a loan.
With prequalification, you can determine whether you qualify for a loan or not, so you know what to do. You can also compare different loan offers that are available online and from some banks.
Add a Co-Signer to Your Application
With a co-signer, you can easily qualify for a loan and get a lower interest rate loan. This is possible because a co-signer’s credit and income information are added to your application.
A co-signer must agree to pay the loan on your behalf if you default.
It’s important to discuss all your loan details and agreement with your co-signer. A co-signer should be able to understand their involvement in your loan terms before agreeing to co-sign.
Research the Available Lenders
As you do your research, try to compare lenders since not all lenders have the same borrowing requirements. Their rates and charges are also different. Compare many options available.
A bad credit lender will offer you an affordable rate. They also offer other important features such as credit-building tools, fat funding, and a mobile app to help you manage your loan payments.