If bad credit haunts your credit report, don’t fret; within this article we will outline how to get around bad credit. First, let’s define what the credit bureau says bad credit is. Typically bad credit is a score lower than 629. Since there are several factors that create a credit score, two people with the same score can have very different credit histories.
Not to mention, if identity theft or a lack of substantial credit history will contribute to your low score. Lenders view both of these instances negatively and base your interest rates and lending terms from what your report displays. Because your score dictates the amount of interest you’ll pay on your car loan or home, and a low score allows them to charge higher interest rate
There is hope! You can still get a loan even if your scores are low. There are ways around paying higher interest rates and ending up with bogus terms. Better Credit offers 5 methods to help get around having bad credit.
Bad Credit: How to Get a Loan
- Method #1: Use a Home Equity Line of CreditIf you have enough equity in your property, you could get a low-interest, tax-deductible line of credit to spend any way you like.Of course tapping your home equity puts your property in jeopardy if you can’t repay the debt. But if you have reliable income and are disciplined about paying down an equity line, it’s an inexpensive option, regardless of your credit score.Compare loans from several institutions so you know you’re getting the lowest interest rate possible before you sign the final paperwork.
- Method #2: Apply to Credit UnionsCredit unions are similar to banks but are owned by their members, who typically have something in common—like working in the same industry or living in the same geographic area. Credit unions are nonprofit organizations that pass along earnings to members in the form of lower fees and higher customer service.Visit findacreditunion.com to locate a credit union near you and give them a call to discuss getting a personal loan. Compare loans from several institutions so you know you’re getting the lowest interest rate possible before you sign the final paperwork.
- Method #3: Request Peer to Peer FinancingPeer to peer or P2P loans provide funding at lower rates than traditional banks and allow you to streamline the borrowing process. Some are able to secure loans as low as 6%. Investors will review your credit scores however, they are more interested in your project and if it is a sound endeavor.The way it works is you, as a borrower, will list the amount of funding you need and if you meet the criteria an investor seeks, a match is made.
- Method #4: Take a Loan from Family or FriendsCall up a family member or a friend for a short-term loan. We did not list this method as our first choice. You may find that asking friends and family is an ideal option for you. If you decide to go this route, we advise that all parties craft a legal document that outlines the terms of the loan. This will put everyone at ease throughout the length of the agreement.Try these websites for writing legal documents: Rocket Lawyer or LegalZoom. Keep in mind if you are in the process of purchasing a new home, your funding needs to be secured if you want to utilize the
If you’re borrowing money to buy a home, the loan must be properly secured in order to use the current mortgage interest deduction. The fact is, that your friends or family members should benefit from the transaction otherwise you risk ruining the relationship.
- Method #5: Use a Credit Repair CompanyCredit repair companies similar to Better Credit work quickly to improve your credit score. Once you contact a credit repair company, they will ask you a few basic questions and then address all of your questions and concerns.To begin improving your credit can be time consuming and challenging on your own, that’s why Better Credit makes the entire process simple. So, if you or someone you know needs a boost in their credit score, contact us now.