Bad credit is an increasingly common problem among people of all backgrounds, and this problem makes it extremely difficult to obtain personal loans. Due to the recent economic downturn, even people who had excellent credit now find themselves struggling to make ends meet. For example, if you were employed by a large corporation but got downsized, you may be facing a mountain of credit card debt, a car loan, or trouble simply paying your bills. A personal loan may be your way out of this struggle, but you may think you aren’t eligible for one if you have bad credit. But there are some easy steps you can take to get cash fast to pay bills, or even consolidate your debt.
1. Clean up Your Credit Report
Always begin the loan application process by ordering a copy of your credit report. By federal law, you are allowed to pull your credit report free of charge annually, from the 3 major credit reporting agencies: Equifax, TransUnion, and Experian. Look over it carefully for inaccuracies and dispute anything that is incorrect. Your credit report is a powerful tool for obtaining a line of credit, so it’s crucial that you make sure it accurately reflects your financial history.
2. Borrow Small, Borrow Long
Another way to increase your chances of obtaining personal loans is to borrow a smaller amount over a longer period of time. An unsecured loan is a greater risk to the lender because as a borrower, you do not have any kind of collateral (such as a house, a car, or valuable property) securing the amount of the loan. So if you borrow a smaller amount of money over a longer period of time, you are increasing the chances you will be able to make your payments and lessening the risk for the lender. It’s a win-win situation, and could make the difference between getting a loan and being denied credit.
3. Apply for Debt Consolidation
If you need personal loans to pay your credit card debt, medical debt, or other unsecured loans, you may want to apply for a debt consolidation loan. In this case, you can apply for an unsecured personal loan which will pay off your credit card debts at a lower rate of interest and with one monthly payment. Or you can opt for a secured loan, using valuable property such as your home as collateral. The secured loan is much easier to obtain as the risk to the lender is greatly reduced. In either case, your debt consolidation loan usually has a much lower rate of interest than credit card debt, and carries a fixed rate of interest, saving you a lot of money in the long run.