Having poor credit can be a real burden. You cannot make a major financial move without feeling the pinch. While it does not close the door for you totally, it does make things a bit more difficult for you. You cannot get deals for example and lenders would be more hesitant to give you the money that you need.
Why Credit is Important
Credit is important because it allows you to use things that you cannot afford in other ways. Credit is all about trust. When a lender trusts you, they will give you the money to buy a house, get a car and open up a credit card. But how can they determine if they trust you or not?
One method that banks and lenders use to determine whether an individual is creditworthy is to run a credit check. There are credit reporting bureaus that keep records on how individuals and companies handled credit. They keep record of the types of loans and the payment history of the consumers. Whenever you apply for a loan from a bank or any traditional lender they would go to the credit reporting firms and ask for your records.
There are three main credit reporting agencies today and these are the following:
These credit reporting firms are required by the law to provide free copies of credit reports to consumers who request yearly. A consumer can then be given a credit score based on the information on his/ her file. The system followed in coming up with this score in the United States is the FICO scoring system which takes into account several factors such as payment history, debt type, age of file and diversity of the account in coming up with the score.
A person with a bad credit score will have a hard time convincing lenders that he/she can pay back a loan. This is the reason why credit is so important right now. It is important when you want to buy a house or get a car loan. While a bad credit will not close all of your opportunities for getting financial products, you will have fewer options and your chances of getting a good deal will be lowered.
If you are thinking of borrowing money and you know that you have bad credit then you might want to rethink your options first.
5 Tips to Get an Online Loan with Poor Credit
Having a bad credit makes you a high risk borrower and most lenders would rather not lend you money. Even if they are willing to lend you money, they would not give you the best deals. They want more assurance that they would be getting their money back. What they do is to charge you with higher interest than what they normally would. If you are serious about getting an online loan despite your bad credit, here are some tips that would improve your chances:
Tip#1- Go for a Credit Union
A credit union provides financial services that are similar to banks. The big difference is that credit unions are not owned by businesses seeking profit. These unions are wholly owned by the members and the main reason for their founding is to provide financial assistance to its members. Because of the nature of credit unions, it is more likely that they are willing to overlook your bad credit and lend you the money that you need under favourable terms.
There are several types of credit union that you can try. There are credit unions which are community based for example, there are also others that are affiliated with large employers. The best move for you is to find a credit union that has a common denominator with you. If you are an active member of the military for example, you can join credit unions for service members. That increases the chances of you getting a better deal.
Because of the financial crisis, some of the smaller credit unions were forced to merge with others, but the good news is that most of the remaining credit unions are looking for borrowers. You would still have to qualify for their loans, but your chances are good. Some credit unions are also offering their services online to make the process more convenient and faster.
Tip#2- Getting a Payday Loan
Perhaps the easiest way that you can get an online loan even though you have bad credit is by getting a payday loan. A payday loan is a short term loan which can be taken against your paycheck. Normally it is supposed to be paid back on the next payday, which is why it is called a payday loan or a cash advance loan. It is meant to keep consumers financially afloat while waiting for the next payday.
Though payday lending has been around for a long time, the development of the internet has caused some changes with its use that has made it even more popular. Most payday lenders now operate using websites. When you want to borrow from a cash advance lender all you have to do is to visit their website. These sites would have application forms. All you have to do is to provide the needed information on the form, submit it and wait for the lender’s reply whether your application was approved or not.
Because the application is done through the internet, most lenders now claim that they can process payday loan applications within hours. Another reason application for this loan is very fast is because of the lack or requirements. States have different laws concerning short term lending, but for the most part, the requirements needed for these loans are not very strict. Payday lenders also do not run the same kind of credit check that banks do. They do not care if you have a bad credit standing, so even if a bank refused to give you a loan because of bad credit, you can still use payday loans.
Tip#3- Borrow from People You Know
If you have bad credit and you need cash quickly, sometimes you don’t have to look very far in order to find a solution to your problem. You don’t have to go online. In some situations where you need cash fast, borrowing from a friend or a relative is the best thing that you can do.
There are those who are reluctant to borrow from relatives and friends no matter how dire their need is. They would rather use some expensive financial product than to go through with that. This is because it can poison relationships. Unpaid loans and similar cases can be a cause of relationships between friends and even relatives going sour. But you can always make steps so that it would not turn out like that. You should treat personal loans from relatives in the same way that you treat a loan from a bank.
Tip#4 Peer to Peer Lending
A relatively new way of getting a loan is peer to peer lending or person to person lending. As the name suggests, the lenders here are not big businesses and corporations but rather individuals. The peer to peer lending sites are just there to facilitate the meeting of the two parties and to help for the arrangement of the loan. In peer to peer lending you are borrowing from individuals who are willing to invest their money on individuals like you. The interests and the fees that you will be charged are varied. The only downside is that you would need to have a decent credit score in order to qualify or at least some other proof that you can really afford to take out the loan. That means if your credit score is really bad then this option might not be for you.
Tip#5- Getting a Co-signer
Having bad credit is not a dead end when it comes to getting online loans. It is not the only thing that lenders check when they look into a loan application. You just have to convince them that you would really be able to afford to pay them back. One way that you can do that and make them overlook the fact that you have a bad credit is by getting a co-signer to your loan.
A co-signer is someone who would guarantee your loan. They are basically saying that should you fail to pay the loan, then they will be the one responsible for it. That would give the lenders an assurance that no matter what happens, they would be able to recover the money that they will be lending to you. But it is not easy to find someone who would be willing to act as a co-signer to a loan.
These are just some of the tips that you can try in order to get online loans even though you have bad credit. Not all of these tips would work for you, but you should analyse your situation and pick one that is best for you.