Finding a loan if you have bad credit is tough, because you’ll find that most conventional lending institutions are not in the business of taking on risks. Sure it might seem like they are, but in reality they look at you the same way an investor looks at a company their considering investing in. You have to from top to bottom be what’s deemed a “good risk”. Here’s what goes into that:
You have to have a steady employment history if not at the same place, then at least in terms of being employed period. If you are able to be at the same place though this comes off better, because it shows consistency and reliability.
You earn a decent amount of money and don’t have a lot of debts. Now here’s the good news, you can have minimal debts, but not make a lot of money. You might still be deemed a good risk, but the type of loan you’ll be able to get is going to be low and probably have high interest.
You have something of value that can be put up for collateral or have someone who can cosign a loan with you. This certainly lowers the risk, because now there are two people the bank can go after if a loan is not taken care of properly. The cosigner has to have good credit though in order to be viable.
If you have bad credit you’re not deemed a good risk. You’re deemed a bad risk, meaning the probability of you being late on payments and ultimately defaulting are pretty high. Banks look at your credit score as a form of character score and they feel when its low then it speaks to other things about you. Banks even use mathematical models to determine who is most likely to default on a loan based on things such as age, sex, race, college attended, current income, what zip code they live in, etc.
The point is if you have bad credit, then you need to focus on places that are going to work with those with bad credit. These are called bad credit loans, but don’t look at them with a stigma attached. Bad credit loan come with the following negatives:
- The interest rate is going to be higher
- The initial amount you can get will be lower
- Fees for late payments will be higher
So where can you go to find bad credit loans?
The key here is to focus on places that don’t fall under the category of being considered conventional. If the place you go is at all conventional, then their selection criteria are going to be conventional as well.
You want to research lending institutions through the internet and make sure you tailor the search using the right keywords. Using keywords such as “Bad credit loans” for example would be a good place to start. Just make sure you the source you checkout is just a payday loan store.
You’ll want sources that state they can work with people with bad credit. One good source you might want to consider using would be peer to peer lending networks. These are online platforms that enable a person to get a loan right from a private individual instead of an institution. Credit is still going to be important, but because you’re going with a private individual you’ll have a whole lot more of a chance to get approved.
Even some payday loan stores offer conventional loans now, but these are shorter term (usually lasting a few months and for small amounts).