What many people do not know is that having bad credit doesn’t mean or make you a financially irresponsible person. The good news is you can still get a payday loan even if you have bad credit. It might be a bit more difficult, but far from impossible.
What is often impossible to do is to get a bank loan with bad credit. People get turned down for bank loans for a variety of reasons, and bad credit is nearly at the top of the list. Since it's not always doable, and anyone can find themselves needing quick cash when they're short on money, so lots of people will often turn to payday loans for a solution. These loans can come in small or large amounts, which can depend on a few factors, depending on the terms of the company you choose.
However, it is important to first know that you might not be able to get a loan if:
- You have an outstanding County Court Judgement (CCJ) in your name
- You have been bankrupt in the last 12 months
- You are on a debt management plan
Yet, other than those 3 obstacles, you can receive either a secured or unsecured loan. A secured loan will involve collateral, while an unsecured one doesn't, and we'll explain that more into this post.
So we'll start by giving you 5 good tips on how to get that loan despite bad credit, but first off, let’s define what bad credit means because different lenders might put different definitions on it.
Lenders use credit scores as a tool to determine if you're a good candidate or high risk one to lend money to. Each lender might determine it differently. In America, for example, we can generally average these scores as:
- Excellent/very good credit score: 700 to 850
- Good credit score: 680 to 699 (Average score is 682)
- Average/OK credit score: 620 to 679
- Low credit score: 580 to 619
- Poor credit score: 500 to 579
- Bad credit score: 300 to 499
Even though 620 – 679 is an OK score, some lenders might consider it still to be high risk, so it greatly depends on the lender or institution you use. Generally speaking, the worse your credit is, the less the options you have. The problem with a bad credit score is not in finding a lender, it is finding a good or reasonable interest on the loan because too low a credit puts you as a high-risk borrower.
Now that you know this, here are the 5 tips to use to help you get that loan you’re in dire need of:
The first step should be to improve your score, and there are some quick ways to do this, which include:
Checking your credit report for discrepancies every time it's updated, paying off debts more than once a month, closing unused credit cards, and by only applying for payday loaners who you meet their criteria. Doing these tasks will improve your score and make it more likely to get a loan as loaners also need to make sure that you can pay them back.
Collateral is something you own with a cash value that is given to a lender. It makes a borrower seem like less of a risk to a lender and it's a type of secured loan. Valuable assets can often be used to secure a loan, such as vehicles, savings account, personal or business real estates, or personal valuables including jewelry to mention a few. No one wants to lose money, and the loaner is no exception. Most online application formats will require you to submit recent documentation of payment or your employment or some sort of documented proof that you do have a source of money. Collateral may not be a requirement, but it is worth considering as a precaution. You will always get back what you put up as collateral after repaying the loan.
Making a large down payment interests lenders and shows you have the capability and means to pay back your loan. This can help you later on if you need a larger loan. If you’re looking for a loan to buy a motorcycle, for instance, there are several non-banking financial institutions online that specialize in bad credit motorcycle loans, which are quite popular for a few reasons. Most people consider purchasing a motorcycle because besides using it for travel or commute, you can use it as a delivery vehicle to make some extra cash that you can use to pay up the loan. In the end, it can actually be viewed as an investment more than anything else.
If you have family members or spouse with a good score, you can take out a joint loan. The loan will be issued based on the basis of both your scores. It also makes it easier for borrowers to qualify for a larger loan. A partner in a joint account will counterbalance the bad credit account.
Having someone, who is ready to act as your guarantor, increases your loan chances significantly. Having a guarantor reduces the risk because they agree to cover the cost of your loan if you can't. If that isn't possible for you, you can find a loan broker, who can mediate between you and the lender.
There are plenty of people who are very responsible with money but can still get strapped for cash because life happens and emergencies and unexpected financial issues can and do pop up for all of us. There’s no reason to feel bad if you’ve got bad credit, but just don’t make it a habit. Payday lenders understand that, which is why when you need cash quickly, there are several reputed loaners willing to help you out.