The process of taking a loan has been made easier by technology. Today, companies like Affirm give instant loans to people when they are shopping online. Peer to peer lending companies like Lending Club and Prosper lend money by aggregating from other lenders. In all this, the process is usually difficult among people with a bad credit score. In this report, we will look at the various ways of getting a loan with bad credit.
What is a Bad Credit?
A credit score is a three-digit number that determines your creditworthiness. The number is created by credit bureaus like TransUnion, Experian, and Equifax. These companies get your borrowing and repayment data from banks and other lenders. A higher number is usually an indication that you have a good track record. It is also an indication that you have higher chances of paying the money. A low credit score, on the other hand, is a number that shows that you have a poor credit history. Banks and other lenders will always have a difficulty in lending you if you have a poor credit score because they are not sure that you can pay.
Still, there are various ways of getting a loan if you have a bad credit score. However, all options that you use will require that you pay a higher interest rate. This rate is required because the lenders want to mitigate their risks.
The first strategy to get a loan with bad credit score is to use one of the many online lending companies like Tunaiku. All of these companies rely on data from credit bureaus. Also, they use other data to verify your creditworthiness. For example, they ask you to give them permissions to read your text messages, see your call logs, and see your transactions. By doing this, they get more information about you and then give you money. Initially, they will only lend you a small amount of money. As you pay it back, they will increase their limits.
Another option that you have is that of secured loans. A secured loan is that which has a collateral. A collateral acts as the security so that if you don’t pay the loan, the lender can take the asset and sell it. A good example of a security is a piece of land, a car, or a house. A mortgage is a good example of a secured loan. Most lenders will accept to give you a loan if you have a security because their risk is relatively limited.
If you have a bad credit, you can use the model of a guarantor. This is a friend or family member who signs the loan for you. The person needs to have a good score and have an account with the bank. Most banks will accept give you a loan because they will go after the guarantor if you fail to pay.
In conclusion, there are other ways of accessing money when you have a bad credit score. You can go to payday loans companies or even ask for financing from a friend or family member. The secret is to pay all these loans on time to ensure that you get more money in the future and to improve your credit score.