Since time in memorial, people have always been in need for loans. In the United States, the country has a combined national debt of more than $20 trillion. Graduates have more than $1.5 trillion in college debt while households are sitting on more than $10 billion in debt. Companies too have more than $15 trillion in debt. Therefore, when you are in need for a loan, you are not alone. You are joining the millions of Americans who have loans. As you apply for a loan, that three-digit number you receive from FICO will go a long way to determine whether you will get the loan or not. It will also determine the interest rates you will pay for these funds. This article will explain how to get personal loans for bad credit guaranteed approval.
Tough Road Ahead
If you have a bad credit, getting a loan will not be an easy thing. If you do, you won’t pay an interest rate similar to that of a person with an excellent credit rating. In deed, as a person with a bad credit score, you are constantly being targeted by the so-called predatory lenders. These are companies that will offer you credit but charge you more than 400% interest rates. Obviously, this is not worth it and will only make you poorer.
What do we mean by a bad credit? A credit score is a three-digit number that is generated by credit rating agencies, which include Transunion, Experian, and Equifax. These are large companies that are valued at more than $13 billion, $27 billion, and $16 billion respectively. FICO, is valued at more than $8 billion. These companies are used by banks and other financial institutions to check the credibility of the borrowers. The general ranking of these scores is as follows.
- poor: 300-579
- fair: 580-669
- good: 670-739
- very good: 740-799
- excellent: 800-850
The higher your score, the faster and easier it is for you to get credit. The lower it is, it means that you will have a tougher process to get financing. These scores don’t apply to individuals only. Companies and governments too have their scores, which are done by companies like Moody’s, S&P, and Fitch. Countries with a weak rating tend to have higher borrowing costs than those with a low rating.
How to Get Personal Loans for Bad Credit Guaranteed Approval
Because you have a bad credit, lenders, including your family and friends will always be skeptical about lending you money. This is because you have less chances of repaying the loan. If they do lend you, they will caution themselves by charging you a higher interest rates. Here are a few ways to get this financing accepted.
First, you can take an equity or secured loan. This is a type of loan where you have a collateral such as a car, piece of land, or house. Most financial institutions will be glad to lend you money when you have collateral because they have something to fall back to if you default on the loan. For example, if you have a home valued at $100k, and you are seeking a $20k loan, the lender will just take possession of the home if you don’t pay. This type of loan is only advisable when you are sure that you will pay back the loan. If you fail, it will be sad to watch your hard-earned property taken away.
Second, if you are a member of a credit union, you should consider borrowing money there. A credit union is a financial institution that operates as a non-profit. It is owned by members and is main goal is not to generate the most returns. As a result, they tend to have a better listening ear compared to banks that are profit-driven. If you are a member, they will be happy to listen to your story.
Third, you should consider Upstart. This is a relatively new company that is trying to disrupt the finance industry. The company, which operates through a peer-to-peer model, has developed sophisticated artificial intelligence and machine learning tools. It uses these algorithms to assess your likelihood to pay. In this, it looks at things like your job, education level, marital status, and phone usage to determine whether to lend you money or not. In addition to Upstart, you should consider other online lending platforms like SoFi, Lending Club, and Prosper.
Don’t Use Payday Loans
As you look for a personal loan with bad credit, you will likely encounter with payday loan companies. Their adverts are all over. While these companies will be happy to lend you money, there is always a catch. Their interest rates are bonkers. Some of these companies will charge you more than 400% interest rates for a small short-term loan. They will give you nightmares you will want to forget.
When you have a bad credit, your options for cheap credit are relatively limited. Most of the companies that are available to offer you this type of credit will charge you a higher rate. The tips highlighted in this article will help you borrow money. As you do this, your goal should be to improve your score. To do this, you should pay your debt and bills on time, keep credit card debt to the minimum, don’t close unused credit cards, and don’t apply for too much credit.
Crispus is a finance professional with more than a decade experience in the industry. Over the years, Crispus has written in-depth articles on leading platforms like CCN, Marketwatch, and Seeking Alpha. He also runs a Forex education and managed account company called WestEndFx.