We get it; some emergencies come up and bills that need to get paid immediately. If you have a low credit score, you might find that it is harder to receive a loan approval due to your credit history. No need to fret; there are still solutions for you. Very bad credit loans are a great solution if you need additional cash to keep you afloat.
If you are looking for more information on how you can obtain a loan with bad credit, continue reading below! We will go over important information about loans for bad credit and who you can contact to apply today!
Urgent Loans for Bad Credit
Having bad credit should not deter you from trying to apply for a loan that you need. There are five easy steps that you can take to obtain bad credit loans online.
1. Check Your Credit Score
Many lenders typically have a minimum credit score requirement that you need to have before they consider extending a loan. You can visit the annual credit report website to obtain your credit reports for free. If you have any discrepancies or significant errors on your report, you can send in a dispute to the major credit bureaus.
Once the dispute has been reviewed, the credit bureau will let you know if the error was removed from the report or not. Eliminating these errors will boost your credit score.
2. Compare Different Lending Companies
Not all companies have a minimum credit score requirement; some will base your loan offer amount on your yearly income. Very bad credit loans lenders may also offer you credit-building tools to help increase your credit score. Most lenders provide fast funding and mobile apps to manage your loan payments.
You can utilize their pre-qualification process before you commit to sending in an application to a company for a loan. When you submit a loan application for personal loans for bad credit, the lender will conduct a hard pull on your credit report.
Pre-qualification only does a soft pull on your credit, providing information to the lender to see what you could receive. Soft credit pulls do not affect your credit score as a hard credit pull would.
4. Add a Cosigner
If you know that your credit score or other requirements are not enough for the lender to extend you a loan, you can opt to add in a cosigner. A cosigner’s information will add value to your application, bettering your chances of approval.
The lender will use the cosigner’s credit score and income in addition to your personal information to determine what they can offer you. Keep in mind that if you default on the loan, the cosigner is responsible for paying off the loan.
5. Apply for the Loan
It is in your best interest to have all the information the lender needs to qualify you for the loan before you apply. Having your ID, T4, pay stubs, and social insurance number on hand will help speed up the application process. Most lenders will let you know about your loan approval the same day, but others may need a few days to review all of your information before making their decision.
Opt for a Secured Loan
If you cannot obtain a cosigner or if your cosigner’s information is not enough to qualify for the loan, there is the option to apply for a secured loan. Secured loans give you the ability to list a property as collateral in exchange for the loan.
Most lenders will accept your car, house, or investment account as collateral. If you decide to take out a loan using your property as collateral, make sure to make your payments on time. The lender will take possession of your property if you fail to pay your loan payments on time.
What Is Bad Credit?
Some lenders have their own credit-scoring models, and others utilize the information off of your credit reports. A great majority of lenders use FICO scores to evaluate your application. FICO scores range from between 300 to 850. Within this range are credit categories.
Credit score range categories:
- Poor rating: 579 and lower
- Fair rating: 580-669
- Good rating: 670-739
- Very good rating: 740-799
- Exceptional: 800 and above
As you can tell, the higher your score, the more likely you are to receive a loan approval with a decent interest rate. Clients who have a fair to poor rating usually have a more challenging time getting approved for loans.
Factors That Affect Your Score
Your credit score number is rated against many factors, such as your payment history and credit usage. Although there are so many different types of credit-scoring models used for many reasons, the main goal is still the same; to figure out the risk of extending a loan to you.
Your payment history is one of the most important factors that lenders take into consideration. A long history of on-time payments helps keep your credit score up to par, while missing payments will decrease your score.
Allowing your bill to go past 30 days can increase your following month’s payments. For example, if you have a car note bill of $400 per month and you miss one month, you are expected to pay $800 by your next due date to catch up. Most creditors report to the credit bureau once your bill is over 30 days late.
You may have heard that it is best to keep your overall credit utilization under 30%, and that is true. The higher your utilization is, the more interest you may end up paying in the long run. Your utilization is the ratio between your credit limit and the total balance that you owe.
Your credit usage is one of the factors that you can immediately change. If you use too much credit, it can negatively impact your score. If you keep your utilization low and pay down your balances, you can almost immediately see an increase in your score.
How Bad Credit Affects Loans
Lenders who offer personal loans for bad credit not only look into your credit and income to determine whether they will extend a loan, but they also review that information to determine what your rate will be. If a customer has a low credit score, it tells the lender that the customer has had issues making payments on time in the past.
If you have struggled with making on-time payments or have high debt, the lender sees you as a higher risk because there is a chance you may not pay that back to them. This high risk can result in an application denial or a higher interest rate.
Credit Score Weight
As we mentioned earlier, your credit score can significantly impact your chances of approval, and each lender’s requirements vary. There are some lenders who take into consideration if you own or rent a home in addition to your debt to income ratio. Others will take your employment length and employment history into consideration as well.
Where to Get Loans for Bad Credit
If you have a great relationship with your local credit union, you can reach out to them for a loan. They may consider your relationship with them when deciding to approve your loan.
If you cannot obtain a loan from a credit union, you can also look into reaching out to online lenders. Some excellent online lenders offer quick approvals and fast funding options.
Calculate Your Loan Payments
It is imperative that you understand your loan’s monthly payment amount, interest rate, and payment schedule before committing to the loan. On-time payments will increase your credit score, while missing payments can damage your score. Knowing your total interest rate will let you know how much the overall loan costs over time.
It may not be worth obtaining the loan if your total interest amount differs from how much you’re borrowing. Many lenders will send you a preview of your payment schedule before you sign the contract. Make sure to review the payment schedule to ensure that you have the financial capacity to make your payments on time.
Very Bad Credit Loans
As you can see, obtaining a loan with bad credit is obtainable with very bad credit loans. Even if you receive an approval for a loan with bad credit, it is essential to work on increasing your credit score so you can later qualify for more loans if needed.
If you are looking for more information on quick loans for bad credit, contact us today! We offer the best rates for bad credit loans, and we are upfront about our fees and repayment plans.