Personal loans can really save the day. Whether unforeseen circumstances arise and you’re short on cash or you’re looking to consolidate your debt, a personal loan could potentially be a good short-term solution. Typically your credit score will impact your ability to be approved for a loan, but there are personal loans that are willing to work with those who have lower credit scores. Unfortunately, higher interest rates are part of getting a loan with bad credit, but getting approved and staying current on the loan payments is one way to increase your credit score. If you’re thinking of shopping around for a personal loan and your credit isn’t that great, here are some things you can do to increase your chances of getting approved.
1. Know Your Score
There are lots of good loans in Utah to take advantage of, but before applying for one of them, it’s in your best interest to know what potential lenders will see. It is free to get a copy of your credit report once every 12 months from Equifax, TransUnion, and Experian. Once you have your credit report, you can address any negative remarks you feel may be in error. If you find any errors or old debts, it’s in your best interest to get them cleared from your report before applying for a personal loan. Doing so can save you money by bringing you a better interest rate and boosting your credit score by a number of points.
2. Make a Budget
Take inventory of your current expenses and income to create a budget. You want to make sure that you can afford to make the monthly payments on time. Failing to do so will further damage your credit and increase your financial stress. Of course, you won’t know the true numbers until you’re approved, but there are loan calculators that you can use to estimate what payments could be. Knowing this information beforehand can help you create a more realistic financial map. If you aren’t confident in your ability to stay current on the payments or if it’s just not a practical option, there are other solutions. A secured credit card is one possible solution.
3. Comparison Shop
Just like you would shop around for a pair of shoes or an airline ticket, you should also do some comparison shopping when choosing a personal loan. Although you won’t be getting the best rates with a lower credit score, you still want to get the best loan that you can with the credit score that you have. Your bank or credit union is a good place to start. If your banking institution is familiar with your spending habits and money management, they may be more likely to give you a better rate than other lenders.
4. Get a Co-Signer
A co-signer can make a difference in whether or not you get approved for a personal loan with a better interest rate. Every lender doesn’t allow for co-signers, so be sure to check that it’s an option if you’re going to attempt this route. It’s also important to know that your co-signer will be responsible for making the payments if you’re unable to if they don’t want the loan to weigh negatively on their credit score. Another factor to consider is that failure to repay the loan could result in a strained relationship with your co-signer.
5. No Credit Check Lenders
It sounds outlandish, but there are lenders that dispense personal loans without doing a credit check. Instead of looking at your credit score, they look at you in a more holistic way. The drawback here is that the interest rate is always high, as they have to cover their risk. When choosing one of these types of personal loans, it is in your best interest to calculate whether or not the interest accrual will outweigh the value of the loan before submitting your loan application.
There are many things that you can do to improve your chances of getting approved for a personal loan, and these are some of the more helpful options. Getting pre-qualified and researching secured loans are two other suggestions, but whatever you choose, it’s important that you’re prepared and aware of your financial status.