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Guarantor Loans for Bad Credit Borrowers
There are different types of lenders that caters to different types of people. So no matter what type of situation you’re in, even while having a bad credit – there are still options for you, you just need to look for them.
Do you want to take out a small personal loan even while having a bad credit score? Worry not, as there is a new type of loan that are popping up that are specifically for you.
A bad credit loan is designed for people who have limited borrowing options because of a bad credit. It’s just a personal loan that is made for bailing people out of a financial emergency.
If you’re ever been in a situation where your car broke down, need to pay medical bills, credit card bills, or other things that you need the money for, then a bad credit loan is for you.
Just like a personal loan, a bad credit loan is paid in a monthly fixed installment. You can get this loan from different kinds of lenders such as:
Credit-Unions – Because of being a non-profit organization, they have a pretty low interest rate. With a maximum of 18%, that is more than reasonable. You can find one in the community near you. When you become a member of a credit-union, borrowing can be easy and cheap.
Family or Friends – If you have a good relationship with your friends and family, or aren’t ashamed for asking help. Then they are a pretty good option. They can offer you low interest rates and will be very flexible with the terms. Just make sure whatever you discussed is documented, and make sure to pay them off to avoid your relationship with them.
Co-Signer – Co-signers can be very good for you when applying for a loan. But just make sure that you find someone who is in a good financial situation because the co-signer will be taking on the same risk as you, if not, even more. The co-signer will gain nothing from the loan other than potentially damaging his/her credit and the risk of paying your debt. So make sure that your co-signer knows what he/she is getting into.
Home Equity – If you have a home equity, then getting a loan won’t be a problem for you.
Online Lenders – Online lenders are a new breed of lenders that are very generous with their terms and on their requirements. Looking and applying for one is very easy and can be done in the comfort of your own home.
There are still some options for you to do before resorting to a loan such as a payroll advance, retirement funds, or tapping into your life insurance. But you must do it only if you’re in dire need of cash.
How Your Credit Scores Affect Your Ability to Borrow
Generally, people with excellent credit scores are presented with the better terms and rates. While those who have a bad credit score are the opposite, or may not even get approved for a loan at all.
Your FICO score is ranked from 300 to 850. 620 and below considered to be bad while 700 to 850 are considered good to excellent.
According to recent data, people who are age 70 and above have the best scores starting from 700 and above. While younger ones are in the grey area of 650. Which is fair, but one slip up could cause their score to drop and will be considered bad.
How to Get a Guarantor Loan with Bad Credit
If you don’t need the money urgently, then the best course of action would be is to boost your credit scores first so you can get terms and rates that are more comfortable for you.
You can start improving your credit by being on time with your payments, paying off any credit card balance, and avoid getting new credit.
These free are the greatest factors in your credit score. On time payments, having a low credit utilization ratio, and have no recent loan applications. By making a conscious effort to do all these stuff, then expecting a good jump in your credit score is pretty reasonable.
When applying for a loan, especially when in person. Make sure you have all the documents needed ready. You can ask your lender what they require or need. If you can show them that you have a stable life, stable income, and more. Then you’ll likely get your loan and might even get better terms.
You can prepare these documents in any case that a lender might need more convincing that you are credit worthy:
- Tax Returns, W-2s and 1099 forms for at least the past two years.
- Pay stubs, employment records, and job history.
- A list of your assets.
- Credit Card bills, medical bills, and all your other unsecured loans.
- Bank Statements.