Many lending institutions require good credit to approve loan applications. Good credit signifies financial responsibility and stability, helping lenders determine who can pay back what they borrow. For individuals with bad credit, this can spell trouble because their options are limited.
Although there are fewer choices, it’s still possible to still get loans with bad credit. Qualifying based on other criteria, working with willing lenders and considering alternatives can help get money for your needs.
What Does It Mean to Have Good or Bad Credit?
A credit score is a three-digit number, typically ranging from 300–850. There are no set criteria for “good” or “bad” credit, as requirements differ from lender to lender. Many institutions, however, consider 650 a good score. If you score below 650, they will consider you a high-risk borrower.
Many lenders will reject those with a credit score below 650, but some will still work with individuals with this score, provided that they meet the other criteria.
The Effects of Bad Credit on Loan Applications
If you happen to have a credit score that’s lower than 670, lenders consider this as a bad sign. Unfortunately, these numbers can significantly limit your options. More often than not, you will be given expensive loan offers with high interest rates.
You’ll also likely be given negative credit reports, which could mean documentation of late payments, particularly terms that are past the due date. All these could lead to a poor image overall, which signals to lenders that you’re high-risk. A poor score could mean money lost on the lender’s end when coupled with a poor credit report.
While lenders can potentially still accept your application, keep in mind that they’ll offset the risk by charging you with higher interest rates and origination fees. As a result, you lose more money in the long run.
Getting Loans with Bad Credit
As previously mentioned, getting a good loan can be difficult if you have a poor credit history. However, it isn’t impossible. Other lenders will still take you into consideration, but you will likely be shopping around with significant limitations.
If you would like to take out a loan, make sure that you still look for the best offers. Begin by looking for lending institutions known for working with borrowers with average credit scores. You’ll likely find better luck working with them, but it’s best to consider your options before investing.
Keep in mind that your options will also be affected by the current market conditions, as lenders tend to tighten or ease their requirements. If you find yourself unable to work with a suitable lender, consider alternative options like:
Getting a loan from a family member
Getting a loan from a friend
Asking a friend or relative to cosign a loan.
Getting a loan with bad credit is never easy, but not impossible. Loans are some of the best ways to receive the money you badly need for an emergency, making it an option worth pursuing. Remember that your bad credit shouldn’t hinder your chances of getting the help that you need. Consider looking for lending institutions that understand your current situation, or perhaps look for alternative options.
Mid-Town Finance offers small loans in Birmingham, AL, coming in various types to suit your needs. We make sure that our clients are given affordable payment plans with no hidden fees. Reach out to us today to learn more.