Getting a loan with bad credit and no cosigner

A credit score of 700 or higher is considered good for a scale of 300-750. However, sadly, according to Vantage, the average credit score in the US is only 673. This is the reason why most people find it difficult to get their loan application approved.

But, don’t give up now. It is possible to get a loan with bad credit. Let us find out how to get a loan with a bad credit score:

First, find out your credit score

It is important to know your credit score so that you can fully understand where you stand financially.

This three digit figure will play a very important role in your loan application. If you’re not sure of your credit score, call your bank and request a free score. You can also get one from FICO for a nominal fee

The company issues five categories:

• Excellent: 800-850
• Very Good: 740-799
• good: 670-739
• Fair: 580-669
• Poor: 300-579

Once you know your credit score, it’s time to start looking for companies that accept applicants with low scores. Apart from this, you should also take steps to improve your credit score.

How to improve your credit score

Improving your credit score is not very easy but it is not completely impossible. However, it may take some time for the change in your credit card processing score to be visible.

Don’t let the time lag change your plans. You should work on improving your credit score so that you can get your loans approved easily in future.

here are some tips:

–      Pay your bills on time

The best way to improve your credit score is to always pay your bills on time. When we talk about bills, we mean all kinds of bills including utility bills, credit card bills.

Most of us want to pay our bills on time, but we are either short on money or we forget the due dates. This is why it can be a good idea to use a mobile app like Mint so that you never miss your payments.

Such apps are designed to send you timely reminders. Some apps may, in fact, even pay you on your behalf by allowing you to create a schedule.

Look around and choose a tool that best suits your situation. However, remember that some such apps can be expensive. Also, if you’re short on money, look for a side gig or reduce your expenses so that you have enough money to pay your bills.

– Get rid of your debt on time

The credit utilization ratio is one of the most important factors that companies consider when deciding on your loan application. It is calculated by taking your total credit card balance and dividing the resulting amount by your credit limit.

For example, if you charge $1,500 per month and your total limit is $5,000 (for all your cards), your credit utilization ratio is 30 percent.

Lenders prefer applicants with low credit ratios, ideally less than 30 percent. Ratios can be an indication of how you use your credit. A low ratio means you haven’t maxed out your card and you know how to manage money.

The best way to work on your credit utilization ratio is to keep your balance low, pay off your debt on time, and become an authorized user on someone else’s account if they are good at using credit.

– Debt consolidation option

While opinions on debt consolidation are divided, it cannot be denied that it can be effective in increasing your credit score. However, it may not be suitable in all situations.

Debt consolidation involves taking out one loan to pay off another debt. However, this can be effective only if your new loan is cheaper than your current loan.

It might sound like an odd deal on paper, but if you’re smart enough, you may be able to get a more affordable loan.

Additionally, you may also have the option to renegotiate the terms for your current loan. Some providers may be willing to offer you a lower rate depending on your performance. So, whatever options you have, try them all.

Scan your credit report for errors

Many people find minor errors in their credit reports that can have a huge impact on their credit scores. Such errors can be difficult to spot, so take the time to go through your credit score in detail.

There are three credit companies that offer three credit reports. While the credit score may vary slightly in each case, if there is a huge difference between the numbers then there could be an error somewhere.

Some common errors include typos, such as entering $60 as $600, which involves entering twice the amount you paid, or the balance.

If you identify such errors, be quick to contact the issuing authority and they will fix it for you.

Look for a company with less stringent terms

If your credit score is low then don’t waste time in visiting banks. Banks are strict in giving loans. Your best option is to turn to other parties, including online lenders, as they are generous and can even give loans to people with low scores.

However, be careful while selecting a lender. Some payday loan providers, for example, can be very expensive with ARPs of 350 percent or more.

Opting for such an expensive loan can put you in a never ending cycle of debt. Also, it can affect your credit score in a negative way.

Instead, consider individual installment lenders. Such loans can come in handy and are easily available.

Opt for a secured loan

A secured loan may seem like a bad idea on paper but if you have a bad credit score then such loans can be very effective.

Lenders do not pay much attention to your credit score when it comes to secured loans.

He got a guarantee in the form of bail. However, you need to be very careful while applying for a secured loan, especially when choosing collateral, as failure to make payments will result in you losing your assets.

However, the terms are simple and the interest rate is also not very high in case of secured loans. You have to deposit only that property which is in your name and is worth more than the value of the loan you have applied for.

Look for a Co-Signer

There are many benefits to getting a co-signer.

• Firstly, you will get a lower interest rate as it will be calculated on the basis of your co-signer’s credit score.
• Secondly, there will be a greater chance of success. However, it is important that your co-signer has a good credit score and that both of you are on the same page regarding the loan.
• This is very important as your failure to make payments on time will affect your co-signer’s credit score as well.

Opt for Home Equity Loan

Although risky, such loans can be very economical as they allow you to borrow money for up to 30 years. Also, interest may also be tax deductible in some cases.

It is similar to a secured loan as you will be using your assets as collateral. Also, some companies charge a fee when you apply for a home equity loan. So, be careful and do your research.

Consider joining a credit union

If you have bad credit it may be a good idea to turn to a credit union. Unlike most financial organizations, credit unions do not pay much attention to your credit rating.

However, the tricky part is becoming a member. We suggest you search for credit unions near you and apply for membership. They will evaluate your application based on factors such as your job history, educational background.

While your credit score is also considered, it is not the most important factor. Becoming a member will make it easier to borrow money with bad credit.

Consequences of having a bad credit score

Even if you are able to get a loan with a low credit score, it is important that you work on improving it as there are other side effects of a low credit score as well. The biggest drawback is the high interest rate.

Lenders prefer to work with individuals with good scores. They also offer low rates to such individuals, so it is important to improve your score.

Now that you know how to get a loan with bad credit, we hope you will not face any difficulty in getting your application approved.