Ways to Get a Personal Loan With Bad Credit!
You may be surprised that a personal loan can be a wise investment. But, what options do you have when you need money and have bad credit? The first option is to get easy bad credit personal loans from a credit union or bank, but they typically charge high-interest rates.
If you fulfil typical criteria for a personal loan, most of these lenders offer you easy bad credit personal loans with a low 4% interest rate or less. However, sometimes, you may find it challenging to get a personal loan because of items that count against your credit scores, such as outstanding debt, late payments, and bankruptcies.
Tips to get a personal loan with bad credit!
To know how to get a personal loan with bad credit, you need to know what the underwriters or creditors consider to approve your loan application. This is important because it will give you an understanding of how you will be able to get past specific financial barriers such as having a bad credit score or other financial obstacles like outstanding debt and late payments. They are:
One of the things that creditors and underwriters look into is your payment history. If your credit score is low and you are experiencing financial hardship, it is best to start making on-time payments; otherwise, avoid opening accounts to maintain a good payment history.
Credit utilisation ratio
Because this has been identified as one of the deciding factors determining your credit score or creditworthiness, you need to know what this is about.
The credit utilisation ratio refers to the amount (per cent) of your credit limit that is currently being used compared to the total amount of available limits you have. It’s also known as the Credit Utilisation Ratio or CUR.
Another factor that will be considered in the decision-making process is the debt you currently owe. If you have difficulty paying off your debt, it is best to resolve all debts before applying for a personal loan.
Another factor that affects the creditworthiness of an individual or business is their credit history. Suppose you have been using credit cards and are currently in bad financial shape. In that case, it is best to refrain from opening new accounts because this may result in further adverse findings by creditors and underwriters.
Other factors, such as how much money you make annually, your age, how stable your employment is etc., affect the decision of a lender or creditor in granting you a loan.
Prove that you have enough income to pay for EMI
When you apply for a personal loan, the lender or creditor will want to know your monthly income. To prove that you have enough income to pay the monthly EMI and if you are employed, you need to provide proof of employment letter. Also, if you are self-employed, provide the tax returns to prove that you are making a sufficiently high income.
If your EMI is more than 35% of your total monthly income, it will affect your credit score as it may indicate financial instability and burden. So be careful about what decisions you make in your life and try to get help from financial experts when needed.
Make an application with a co-applicant!
If you are applying for a loan on your own, there is no need to get a co-applicant. You can always apply by yourself. But if you want to increase your chances of getting approved by the creditor or lender, it’s best to get a co-applicant.
Convince the lender to consider your credit report as NA or NH!
There may be specific lenders that will only consider you for a loan if your credit report is placed in the “NA” or “NH” status. In other words, they will consider you as having no outstanding debt.
If the lender places your credit report in the “NA” or “NH” status, it means that they have analysed your payment history and found that you have been making timely payments to all of your creditors.
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