How to Qualify for an Installment Loan with Bad Credit

With bad credit, you are considered to be a high-risk customer by major lending institutions and major banks. These lenders will only give you a loan if you have a good credit score. Due to your bad credit, you might think that you can only get a loan from sources that charge high interest rates. There are alternate options available. What options do you have? Here are a few options and tips.

Visit Credit Unions

The only difference between credit unions and banks is that credit unions are owned by members, not shareholders. These members usually have common interest. You can come across a credit union for members who come from a certain region or working in the same industry. Since they are non-profit institutions they offer loans at low interest rates.

A credit union, especially one that is community-based or one that is associated with your employer, will listen to you even if you have bad credit. Visit several credit unions and compare the interest rates before you make a final decision.

Ask for a Loan from Family or Friends

Your family and friends will not look at your credit score for them to lend you. When your friend or relative agrees to give you a loan, treat it like a business transaction. Document the transaction by having a written agreement. The agreement should clearly show the interest rate, loan terms, and the consequences of not paying the debt. Refusing to pay a loan from family or friends is worse than having bad credit. To maintain on good terms with your friends and family pay the loan on time.

Find a Co-Signer

You’ve tried credit unions, family and friends, but have not been successful. What do you do? Look for someone who has good credit and trusts that you can repay the loan. Having a qualified co-signer willing to help since the lender will set terms based on the good credit of your co-signer. The co-signer will also be responsible for the loan if you default on payments.

Because the record of payments will be on both of your credit reports, defaulting or paying late will damage your co-signer’s credit along with yours. To improve your credit score, you will need to make timely payments so that you can get loans in future without a co-signer.

Repair your bad credit

There are instances where bad credit listings are placed on your file without adherence to the law. You can choose to correct the errors on your own or with the help of a credit repair specialist. Not all credit repair specialists are genuine due to some disrupting the reputation of the industry by running scams.

To correct a bad listing on your own you will need to have a copy of your current credit report. Review your report and look for mistakes. If you find an error, contact the listed credit bureau/s so that the bad listing can be removed. With the questionable item removed you will improve your chances of loan approval.  In the meantime as you are rebuilding our credit you may be able to apply with a loan company that can work with you.  Some websites even offer loans with no credit check.

Be honest

Ask a lender to spare some time and have an in-person interview with you. Being honest, especially when questioned on red flags in your credit history, might help you convince the lender to give you a loan. If you get the interview, prepare any documents that will prove that you can repay a loan. With evidence that you have previously paid off loans, the lender may be swayed to work the loan terms over for possible approval.

Conclusion

With the above options and tips, you can seek out options for installment loans even with poor credit. Having bad credit is a problem, but is not a hindrance to getting an installment loan.

One thought on “How to Qualify for an Installment Loan with Bad Credit

  1. Mary Anne

    As someone with very poor credit, I can sincerely appreciate this article! After my divorce my credit just hit the skids.

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