Everybody is in debt these days. In credit cards alone Americans carry an average of $6,354 per person. That's not even considering mortgages, auto, or education loans that each have their own hefty balances.
You're approaching your first time getting a loan, but the statistics scare you. For lack of credit history (and that disastrous attempt at handling a credit card when you were 18), your credit report isn't amazing. Is it possible to find a loan with favorable terms?
Let's take a look at some tips for taking out a loan with a poor credit report.
No Credit Check Lenders
Did you know there are lenders who will consider your request for a loan without pulling your credit report? Many online lenders like Bonsai Finance are turning to different methods for checking your background.
They first look at your income to determine your ability to repay the loan. Then they'll look at alternate records like rent payments, utility payments, and even your driving record.
This is the information they'll use to consider your request rather than the traditional credit check.
Put up Collateral
If you have an asset that is worth the amount of money you're asking for, you can use it as collateral. Collateral assures the lender by giving them something they can seize and sell to recoup their loss if you default on the loan.
This happens automatically when taking out a mortgage. The lender has the right to seize the house and sell it if you stop making your payments. But you can do this with smaller loans as well. Perhaps you own a car or small piece of property free and clear that you can use as collateral.
Find a Cosigner
An excellent way to give your credit score an instant boost is by finding a cosigner with good credit. A cosigner promises to pay the loan if you don't. Thus, the lender will take the cosigner's credit into consideration.
However, be careful with this method. Many a relationship has been ruined because someone defaulted on a loan and left their kind-hearted friend or family member holding the bag.
Some lenders will approve you for small loans if you let them set up autopayments to coincide with when you get paid. They have security in knowing that the loan payment is automatically paid immediately when you get paid. They don't have to worry about you remembering and there will be money in the account for the transfer.
Ready for Your First Time Getting a Loan?
The first time getting a loan can be intimidating, especially when you have bad credit or no credit. But don't let that stop you from reaching for your dreams. Debt isn't necessarily a bad thing — as long as you are using it for needs (not wants) or items that don't depreciate.
Want to learn more? Browse our blog for more interesting tidbits.