You wouldn’t have to borrow any money in a perfect world. But now and then, you might need some help to settle your financials. Getting a loan is the first choice for most. It is easy for people with good credit to get a loan, but it can be difficult for an individual with bad or no credit.
There is no need to worry; here are some tips to get a loan with any credit rating.
Bad Credit Lending Companies VS Banks
When you apply for a loan, every lender will check your credit history. Unfortunately, very few banks approve bad credit loans. The good news is that many companies are only made for people with bad or no score. Here are three reasons why people choose to go to these private organizations rather than banks:
- Banks often take a certain amount of time to decide whether to approve a loan or not. There are many creditors out there that offer guaranteed approval, no matter what your rating.
- You can apply for both secured and unsecured loans with private lenders.
- Many of these organizations don’t check the credit history; instead, they look into other factors like income and details of your job, among other things. Whereas the banks conduct thorough research.
However, it would be best if you still looked out for the best companies because many are unprincipled and unreliable. You should apply with Friendly Lender for a bad credit loan.
What Can Personal Loans Be Used For?
People often choose to get personal loans over others because they can be used for any legitimate purpose. You could want the money to:
- Cover medical bills
- Purchase a new or pre-owned vehicle
- Go on a vacation
- Make down payment on a home
- Buy new household appliances or equipment
- Pay credit card debt
And there are many more reasons. There are other loans that are specific, like auto loans for cars, but personal loans are the most popular.
Types Of Personal Loans
When you ask for a loan at the bank or a lending company, they will ask if you can put up any collateral. That can be your house, car, property, valuable jewelry, and anything they can accept. If you can put up collateral for a loan, the chances of getting a better interest rate are high. However, the lender will take over the things if you fail to make the payments.
These loans are called unsecured because you are not required to put anything up as collateral. You don’t have to guarantee the loan with anything. However, these loans are given to people with an excellent credit score. These types of loans typically have a higher interest rate because the lender is risking their money.
Reverse Or Cash Secured Savings Loan
A reverse loan is so-called because you pay the amount in installments and eventually take that money out. You don’t get any money upfront. These are mostly used to build up credit scores.
Getting A Loan With Good Credit
You would think that having a good credit would be the only thing that is required to get a loan, but that is not the case. There is a list of eligibility requirements for personal loans that every company or bank has. Here are the most common ones:
- You should be at least 18 years old when applying.
- You should be a Canadian resident. Either temporary or permanent.
- You should have a bank account under your name.
- Have a driver’s license, identity card, passport, or anything else that can prove your identity.
- Have a utility, water, or cable bill to show proof of residence.
- Show proof of income.
- Show your regular monthly expenditure statements.
The company that provides the best loans, with the least interest rates, also require:
- A credit score that is above average, preferably above 650.
- You to have a low debt to income ratio. That means that not much of your income should be going toward paying off a current loan. Less than 36% is ideal.
Compare And Decide
When you seem to meet these basic requirements, it would be best to check some banks. Visit the bank where you have an account first. They should give you reasonable rates. You should check other companies as well, even if your bank offers a good enough plan.
Then you can choose your preferred organization and get them to reduce their interest rates further, if possible. Don’t forget that a little negotiation can go a long way.
Getting A Loan With Bad Credit
Before you go and apply for a bad credit loan at a bank or a lending company, do your due diligence. It is easy to fall prey to many unreliable lenders out there. That is why you should look into:
It would be best if you carefully read all the documents before signing. Take them home if you can, or to a friend. Because many of these include various hidden fees that are often quite high.
You should look into what the penalties are if you ever miss a payment, make a late payment, or want to pay off the entire amount earlier than the set date.
- Interest Rates
Since bad or no credit loans have a higher risk, lenders charge higher rates. However, some financial institutions can ask for enormous interest rates. That is why, it is advised, that you check the maximum prices of a lender before applying.