Opening lines of credit can be a borderline necessity in the modern world. From purchasing a home to finding the car you need to get to work and life your life, if you need to make a large purchase and don’t have a savings account large enough to cover it then you will need to take out a loan in order to finance your purchase. If you have a low credit score it can be difficult to impossible to get a loan large enough to handle the purchases you need to make. If you’re struggling to find the financing you need there are several options for getting a loan with bad credit.
Borrow From Loved Ones
Although finding a friend or family member can be the most beneficial option it should also be done with care. While a loved one may be willing to ignore your poor score, and potentially offer the loan with little to no interest, the potential social costs of being unable to repay are much higher than borrowing from a lender. Only borrow from a loved one if you are positive you will be able to pay the full balance off in order to avoid endangering the relationship.
Acquire a Secured Line
The next step up from borrowing from a friend is to opt for a secured line of credit. For a secured credit card this commonly means putting up an initial deposit equal to the card’s limit, allowing you to get a card and start building credit while minimizing the lender’s risk. With loans, you can secure your loan by putting up collateral, like your home in a mortgage. As with borrowing from loved ones, however, it is very important to not over-borrow or you may lose the property you put up as security.
Try a Credit Union
Credit unions are a great way for individuals who have low credit scores to find financing. While you will have to successfully apply to become a member of the credit union, once accepted credit unions are often more willing to work with you and may even be able to offer improved rates, as well.
Find a Co-Signer
When you are making a big purchase, such as getting a car with bad credit, and you simply can not raise your score high enough to qualify for the loans you need, a co-signer is a potential solution. By finding someone with strong credit willing to co-sign on your loan you can qualify for a loan you otherwise would not receive, or can get better rates on the loan you would have been offered. Remember that by co-signing they are linking their credit to the loan as well so it’s important that you stay on top of the payments so as to not damage your loved one’s score.
Fix Your Credit
Although the above options are all possibilities when you are in need of financing immediately but have poor credit, your best option is to plan ahead. Even if you don’t think you will be in the market for a loan any time soon, start working to improve your credit score now. Pay off large balances and get up to date with all your lenders. Make sure you don’t fall 30 days or more behind with any of your current lenders. Although it is more akin to steering a big ocean liner than a nimble sports car, with responsible borrowing habits you can begin to turn your credit score in a positive direction.
Having poor credit can be a massive psychological burden, especially when it prevents you from pursuing something you want or even need to acquire. Start working to improve your credit immediately, and if you need financing before your recovery is complete then try one of the above short-term solutions.