A personal loan or an installment loan can help you cover just about anything from a home renovation to wedding expenses. Unfortunately, qualifying for one can be tricky, especially if you have bad credit or no credit. While there is no one surefire trick to landing a personal or installment loan, a low credit score doesn’t have to be a dead end for you. There are things that just about anybody can do to be approved for a loan. Some people might have to put in more work than others, but it is possible if you follow these helpful tips.
Know Your Credit Score
Most lenders have a minimum credit score requirement, and they may not be willing to work with you if your FICO score is too low. Generally speaking, a low FICO credit score is anything lower than 629, although different lenders have different requirements.
If you want to be considered for a loan for any reason, your first step should be to check your credit and determine your score. A lot of financial companies can give you access to free credit reports, so take full advantage of them if you can. Even if you might not like what you find from your report, you can at least get an idea of where you stand and start making a plan to improve your credit. You might even find errors in your report, such as wrong accounts, closed accounts that are being reported as open, and incorrect credit limits on the accounts that are open. Fixing these errors is a simple matter, but it will improve your credit.
Start Fixing Your Credit
Once you know what your credit score is and where it can be improved, it’s time to start fixing your bad credit. This may take some time and some help from a financial advisor, but it’s a crucial step if you ever want to be approved for a loan. Make plans to pay back any debts you might have, and try to pay more than the minimum for your monthly payments whenever you can. If you feel confident in your ability to pay your monthly bills on time, you can call your credit card company and ask if you can increase your credit limit. This can backfire if you put too much on your card, but you should increase your credit over time as long as you can pay what you owe every month.
Compare Lenders
After you’ve proven that you can stick to your plan to increase your credit, it’s time to start comparing different lenders. Each lender has their own borrowing requirements, so don’t commit to one until you’ve explored all of your options. The best lenders for people with bad credit will be those who will offer features such as credit-building tools, fast funding, and anything else that will allow you to easily afford your monthly payments.
Get Pre-Qualified
Being pre-qualified for a loan will tell you what kinds of terms and loan amount you can expect, and it won’t affect your credit score. It’s a great way to shop around for different loans and prepare a budget for when you are approved for a loan. It’s not a guarantee that you will be approved, but it’s an important step in the process. Most financial companies offer this feature, so take full advantage of it.
Get a Co-Signer
If you’re afraid that your credit score will immediately disqualify you for a loan, you can always find someone who is willing to co-sign with you. When you have someone co-sign with you on a loan, their credit history and income will be factored into the lender’s decision, so you should find someone you trust. Keep in mind that they will be as responsible for the loan as you are, and their credit will take a hit if you are ever in default.
Gather All Important Documents
When it comes time to apply for your loan, make sure you have all the documents you will need for the application. This usually includes W-2s, paystubs from your employer, and a recent bank statement showing that you have a bank account in good standing. Every lender has their own requirements, so make sure that you speak to your lender to make sure all of your bases are covered.
Be Realistic
While it is very possible to qualify for a personal or installment loan if you have bad credit, you should still keep your expectations realistic. It might be tempting to ask for more money than you might need, but you’re more likely to be rejected if you do. Instead, calculate exactly how much you’ll need for your loan, and don’t ask for more. A personal loan is meant to cover a necessity so that you can improve your quality of life. As long as you can prove that you can pay back such a loan and that it is going to be put to good use, your chances of being approved will be much higher.
