Whether you’re facing the aftermath of a financial setback or you’re struggling to build credit for the first time, having a low score can make it difficult to obtain a traditional loan. Not only are you less likely to be approved, but you might also have to deal with higher interest rates and additional expenses such as origination fees.
The good news is that there’s still a surprising range of options for borrowing the money you need, even if you have no credit history at all. They often come in the form of private loans offered by sources outside of traditional banks and credit unions. However, not all lenders are made equal.
To make a safer and more cost-effective choice, consider the following 4 ways to get a loan with low credit.
The proliferation of peer-to-peer lending has made it much easier to borrow, even if your credit report has seen better days. The internet is home to numerous companies that specialise in this type of loan. Some are geared towards small business owners, while others are more accommodating towards individuals.
Rates are often competitive among peer-to-peer lenders and repayment terms can span longer time periods than those offered by traditional sources. It’s best to do your research here and find out whether you fit the requirements before making an application.
Bad Credit Loan
A logical solution is to look towards providers that specifically deal with less creditworthy borrowers. Your eligibility is typically determined by your present-day circumstances. In principle, bad credit loans are no different to normal loans – you just might have to pay a higher interest rate.
Websites such as simplepersonalloans.co.uk offer an easy way to apply for a bad credit loan. They deal with numerous lenders, but you only need to fill out a single online application. From here, the details of your loan are sent to available facilities for consideration.
Friends and Family
If conventional credit facilities are to no avail, there might be a friend or family member with extra cash who can assist you. A formal approach is recommended, which typically involves a written agreement, specific terms for repayment, and reporting to credit bureaus. The last factor is especially important as it can contribute to rebuilding your credit score.
Start with an honest discussion where the needs and expectations of both parties are outlined in detail. Only when the terms of the loan are mutually agreed upon should you move forward. If all goes according to plan, you can likely benefit from lower interest rates.
Home Equity Loan
If you have some degree of ownership in your home, you can use it as collateral in place of a credit score to obtain a home equity loan. A potential benefit here is that the interest you pay on the loan is tax-deductible. However, it’s important to note that being unable to repay the debt can put your property at risk.
Take some time to explore your options. Remember that making timely payments on bills, rectifying errors on your credit report and staying within the limits of your credit card can also help.