If you are looking at taking out a personal loan, but are weighed down with a bad credit score, don’t give up. While it might not be as straight forward as you hoped, if you shop around you will come across a lender ready to give you a chance.

What is a Personal Loan?

Personal loans are generally taken out when you need a quick cash injection. While ideally, you would wait until your credit score has improved before going ahead, this just isn’t always possible. Unlike many of the other types of loans on the market that are geared towards particular goals, such as a mortgage when you buy a home and an auto loan when you buy a car, a personal loan can be spent on anything you choose.

Here are some reasons you might be considering a personal loan:

  1. You have an urgent repair needed on your home that can’t wait.
  2. Need to fly overseas to visit a sick relative.
  3. You are going back to study and need the funds to pay for it.

Fixing Your Bad Credit Score

A bad credit score shouldn’t make you feel like a bad person. It can happen to the best of us. It’s no secret that sometimes life just gets in the way, and there are plenty of reasons you may have found yourself left with a bad credit score.

The best thing you can do is accept it and move forward. Look at how you ended up with the bad credit score in the first place, and take steps to ensure you don’t fall down the same path.

Unfortunately, there is no quick fix to your credit history. Time is your best ally. Here are some ways to prevent it from happening again:

  • Take a look at all your current debts and their terms and conditions. Make sure you have factored them into your budget and ensure that each repayment is made on time. If you have fallen behind in the past, now is your chance to rectify that situation and get on top of it.
  • Keep balances low on your credit cards. Just because you have the credit available to you, doesn’t mean you should be spending it. In fact, the closer you are to reaching your limit, the worse this reflects on your credit score. This is referred to as your credit utilisation ratio.
  • Don’t keep applying for credit. Every time you do, it places a hard enquiry on your report which is reflected in your credit score. These remain on your credit report for two years.

All these reasons require cash quickly, and you don’t have the luxury of waiting around and working on your credit score before taking it out. So what are your options?

How to Get Around it

A bad credit score, while not ideal, isn’t the be-all and end-all. You still have plenty of options available to you when it comes to taking out a personal loan. You can take out what is referred to as a bad credit loan.

A bad credit loan works the same way as any other personal loan, but they are offered to people with bad credit. Here is the best way to take one out.

Find a Lender

Firstly, shop around for a lender. The truth is, there are plenty of lenders who won’t take you on with bad credit score, so suss them out and find the ones who will. Many banks might take you on for a bad credit loan, but for a high-interest rate (discussed below), so consider all your options and look beyond just the traditional lenders.

Don’t feel like you have to go with the first lender you come across. Just because you have a bad credit score, doesn’t mean you can’t still shop around. To avoid any hard inquiries against your name further impacting your credit report, ensure all your shopping around happens in the space of 30 days. This will then count as just the one hard enquiry.

Find a Good Interest Rate

The next thing to do is accept that your interest rate is going to be higher. It’s a fact. If you have bad credit, you are considered a risk to lenders, so they have to protect themselves in the process. This is usually done through higher than normal interest fees. Although, these rates still tend to be lower than credit card rates, which is what makes it a worthwhile option.

Consider a Secured Loan

A secured loan is one where you offer something up as collateral. They are a great option when you have a bad credit score, as they take away most of the risk from the lender’s part. You could offer up your home, car, or another big-ticket item. Of course, be sure that you can pay the loan back or you could find yourself in even bigger trouble.

Don’t let your bad credit hold you back. If an emergency arises and you find yourself short of cash, it’s important to know that there are plenty of options out there for you. Do your research and find a loan that works for you. Of course, the best solution is to improve your credit score to make things even easier.

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