Personal loans can be very useful for consolidating debt, paying for a vacation, or taking care of other unexpected expenses; however, it can be tricky to get personal loans for bad credit. The majority of personal loans are signature loans, which means that they are backed up by your signature and your promise to pay them back. If you have bad credit, a signature on a contract is often not enough for a bank to lend you money. Use these three tips to help you get a personal loan with bad credit.
1. Try to find any collateral you may be able to use to get a personal loan. Collateral is something that the bank can seize in the event that you do not pay on your personal loan. Some people use a car or house, since there tends to be lots of value in those. However, it’s wise to use something with less value; if you can’t pay on your loan, you don’t want to also lose your car or house! Many people use jewelry, musical instruments, or electronics as collateral for loans. Remember that the amount of the loan you can get then depends on the current value of the collateral.
2. Be willing to accept a higher interest rate. Having bad credit has its consequences, and being charged a higher interest rate is one of them. Work with your banker and ask about other personal loan options that involve a higher interest rate; you’ll have to pay more over time, but it’s often the only way to get personal loans for bad credit. Additionally, bring in lots of documentation that proves your income and assets; it may help you get approved.
3. If you have family members that trust you and are willing to help you out financially, consider asking one of them to co-sign your loan. Having a co-signer with good credit and verifiable income is one of the best ways to get personal loans for bad credit. Ensure that the person you ask is comfortable with being listed on the loan, since they are held just as accountable for loan payments as you are.