The Comprehensive Guide to Bad Credit Loans

What if there was a comprehensive guide that walked you through the step-by-step process to getting approved for a bad credit loan?

Chapter: The Comprehensive Guide to Bad Credit Loans

Imagine discovering a simple yet surefire way to secure the financing you need despite having bad credit.

What if there was a comprehensive guide that walked you through the step-by-step process to getting approved for a bad credit loan?

A guide that provides you convenient access to all the information you need about bad credit loans all in one place?

You'd probably be excited to read all of it.

Especially if you've always worried your bad credit will doom your chances of securing a loan, either for yourself or your business.

Lucky for you, that's exactly what you'll find in this guide: a comprehensive rundown of how bad credit works and the different types of loans available to you.

Including a complete review of the various lenders you can choose from, along with the pros and cons of each one.

Plus you'll get 11 extremely practical, actionable steps that you can use to boost your chances of getting a loan with bad credit!

Not to mention the top seven ways to easily pay back your bad credit loan after you're approved and more!

If you have bad credit, don't despair because you're definitely not alone.

In fact, 30% of Americans have bad credit.

And I know for a fact that you can still get a loan.

You can even look at your unfavorable credit in a positive light: It will drive you to seek as many loan options as possible to make sure you find the best one.

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The process is fast, secure, and there is no charge to find a lender. All credit types are welcome and the funds could be deposited directly into your bank account as soon as tomorrow.

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Yes, you may encounter a few speed bumps along the way, but that doesn't mean you won't get a bad credit loan in the end.

And the best news is we'll be here to guide you every step of the way.

Why We Wrote This Guide

Bad credit can be frustrating, especially if you don't know the reasons why you have it. I've consulted with so many people who felt crippled by their bad credit.

The truth is they simply didn't know there are options available for them to secure a loan. Because oftentimes, it's not easy for them to find the right information on how to proceed.

Yes, there are tons of resources available on the Internet. But you shouldn't have to spend countless hours searching for all of your answers.

So think of this guide as your one-stop-shop for everything you need when it comes to the basics of bad credit.

You'll learn what bad credit is, how it works, and what options you have moving forward.

Who This Guide Is Really For

Who Is This Guide For?This guide was written mainly for people who have bad credit, are on the brink of bad credit, or think that they might have bad credit or a poor credit history. But they're not the only ones who can benefit from this guide.

Anyone who wants to improve their credit score, avoid bad credit, or educate themselves on basic personal finance and personal loans will likely find this guide extremely informative.

How Much of This Guide Should You Read?

This is a comprehensive guide that covers a wide range of topics related to bad credit.

You'll benefit the most if you read it from beginning to end since the progression builds based on that order.

This is the quintessential guide to bad credit loans.

I'm confident that the information will not only help improve your personal finances, and show you how to get rid of your bad credit, but also provide you with an effortless way to get a loan fast.

So now that you know what to expect, it's time to dive in.

Chapter 1:

Understanding Your Credit Score

Chapter: Understanding Your Credit Score

Learning your credit score is the first step to getting a bad credit loan

Most loans will have a minimum credit score required to apply. Depending on your score, you'll be able to see which types of loans you qualify for and which loan options you should ignore.

Who knows, you may even find out that your credit score isn't as bad as you thought it was.

The most popular and commonly used scoring model is the FICO score. It stands for the Fair Isaac Corporation, which was originally founded all the way back in 1956.

The company became publicly traded on the New York Stock Exchange in 1986.

In 1989, the first FICO score was introduced, and ever since, it's become arguably the most important component of our financial lives.

Your score not only determines your likelihood of getting approved for a loan, there are myriad other important things it can affect, including things like renting an apartment, qualifying for insurance, or even landing a job.

Credit scores range from 300 to 850. Here is the breakdown of ranges according to Experian, one of the three credit bureaus:

  • 800–850 – Exceptional
  • 740–799 – Very Good
  • 670–739 – Good
  • 580–669 – Fair
  • 300–579 – Poor

Other companies may use a slightly different scale, but we'll stick to this one in this guide.

So when I talk about bad credit, I'm referring to anything in the "Poor" credit range: 300–579.

Why do lenders care about your credit score?

Well, research shows that less than 1% of people that have scores above 740 are likely to have serious delinquency in the future—which means they're the lowest risk for borrowing money.

However, anyone who falls within the 670 to 739 range—the median score for US consumers—is still considered to be an acceptable borrower.

Scores between 580 and 669 are considered below average. It won't be as easy to get a loan if you fall within this range because lenders know that about 27% of people with this score will become seriously delinquent.

62% of people with a credit score of 579 or less will have serious delinquency. This is why, if your score is in this range, getting a loan can feel like a challenge.

But don't worry, there are still numerous options available to you, as you will see shortly.

However, even though it's possible to get a loan with bad credit, there are many advantages of having a higher score. These benefits can definitely make improving your credit score worth your while.

For example, a higher score can save you thousands of dollars in interest charges, due to lower rates.

Not only that, every time you step up into the next credit range, you'll experience the following perks:

  1. Greater chance of being approved for new credit.
  2. More power to shop around for the best deal.
  3. An ability to borrow larger amounts.
  4. More flexibility in loan terms.
  5. Reduced deposits, or no deposits on things like utilities and cell phones.
  6. Lower car insurance payments.
  7. Increased chances of securing a mortgage or rental agreement.
  8. A better chance of landing your dream job.
Chapter 2:

Factors That Impact Your Credit Score

What determines your credit score shouldn't be a mystery.

Chapter: Factors That Impact Your Credit Score

There are three primary credit bureaus in the US that lenders report to:

  1. Transunion
  2. Equifax
  3. Experian

These bureaus then compile the data provided and produce your credit score and a credit report about you.

Not all lenders report to all bureaus, which can result in three different scores for the same person, so make sure you check out all three bureaus when you're reviewing your score.

If you've heard of the VantageScore model, this is a credit model the three bureaus developed as an alternative to the FICO model.

However, Vantage and FICO basically measure all of the same factors.

The main difference is the weight they place on each one, so while you may find you have a higher score based on one of the models, it's unlikely to vary by much.

90% of top lenders in the US use the FICO model to determine eligibility for consumers who are seeking credit.

So that's the one we will focus on.

It's in your best interest to know how this score is determined since that's most likely how you're going to be evaluated.

Once you get familiar with these factors, you can make changes to help increase your score.

How a FICO Score Breaks Down

FICO uses the following measures to determine your score:

  1. Payment history
  2. Amount owed
  3. Length of credit history
  4. Credit mix
  5. New credit

Payment History

Your payment history is the most important factor. 35% of your credit score is determined by this, and it's probably the first thing that a lender will check when determining your eligibility for a loan.

Can you pay accounts on time?

With that said, late payments won't necessarily kill your score. If you've got long years of good credit established, a couple minor instances won't be detrimental to your score. Your overall history will outweigh these.

On the other hand, having no late payments doesn't automatically tr anslate to a perfect credit score either. It will definitely increase your score, but there are still other factors that will be used.

These are the types of accounts that will be used for your payment history:

  1. Mortgage loans.
  2. Installment loans, such as car loans.
  3. All major credit cards (American Express, Visa, Discover, Mastercard, etc.)
  4. Finance company credit accounts.
  5. Retail credit, such as department store credit cards.

If a payment is late or missed, FICO takes other factors into consideration, as well.

These include:

  1. How late was the payment?
  2. How much was owed?
  3. How recent was the occurrence?
  4. How many times did this happen?

Scores are adjusted accordingly based on these answers.

Amount Owed

The amounts you owed is another big factor. This weighs about 30% of your score.

But, just because you have credit accounts and owe money, it doesn't automatically mean that you'll have a low credit score. Lenders need to determine if you are a high-risk candidate.

This is based on percentages. They use your utilization ratio for revolving accounts.

To determine this ratio, they take your total amount of available credit and find out how much of that credit is currently being used.

Higher utilization percentages will indicate that a person is more likely to make late payments or miss them completely. This lowers your credit score.

For example, maxing out your credit cards will drastically increase your utilization ratio.

Be aware that even if you pay off your cards on time and in full, there still may be a balance on your credit report. Typically, the balance will show as whatever your last statement was.

The amount owed is also weighed between the types of accounts, such as credit cards or installment loans. How many of these accounts have balances?

Having more accounts with high balances translates to high risk, and therefore lowers credit scores.

But paying down installment loans shows that you are able to repay debts, which will increase your score.

Length of Credit History

For the most part, a longer credit history will increase your FICO score, but there are some instances when people with a short history can still receive high scores, depending on the rest of the report.

These are the specific factors that determine how the length of your credit history will ultimately affect your score:

  1. The age of your oldest credit account.
  2. How long all credit accounts have been established
  3. The age of your newest credit account.
  4. Average age of all credit accounts.
  5. How long since specific accounts have been used.

So the key isn't just having old credit cards. If they're not being used, or if you also have a lot of new accounts, it's not helping your score.

All of these elements combined will make up roughly 15% of your credit score.

Credit Mix

Your credit account types need to be diverse in their nature. This factor weighs about 10% of your total score, so it won't make or break you, but it certainly helps.

How many different types of credit do you have?

  • Credit cards
  • Installment loans
  • Mortgages
  • Retail accounts
  • Finance company accounts

All of these play a factor in your score.

Don't get me wrong: I'm not saying that you need to have one of each. You should not just open accounts if you don't plan on using them.

But, having a good mix is important for people without a long history of credit since there won't be lots of other information in your report to determine your score.

Lenders check your total number of accounts, revolving credit, and installments. Credit cards and installment loans that are paid on time will boost your score.

Also be aware that not owning any credit card at all will hurt your score because lenders see this as high risk.

Not only does it reduce your credit mix, but it means you have no card purchase and payment history for them to review.

Here's something else to keep in mind: Just because you close an account, it doesn't mean that it disappears from your credit report.

Closed accounts still play a factor in your FICO score for up to seven years.

New Credit

How much new credit do you have? This factor is about 10% of your score.

If you have applied for lots of new credit lines in a short period of time, it generally makes you perceived as a higher risk, so it's not smart to do this.

How frequently you shop for new credit also impacts your score.

Opening new accounts decreases your average credit age, which translates to a lower score.

Recent inquiries about new credit appear on your report and usually stay there for two years if a hard pull was done on your report.

What's a hard pull, you may ask?

It means a lender pulled a copy of your credit report in order to decide whether to lend to you.

In most cases, this happens when you apply for credit.

However, sometimes lenders will advertise that they only do a soft pull.

This means that they check your credit report as part of a "background check", which doesn't impact your score.

FICO factors in all hard inquiries made in the last 12 months.

Having credit inquiries doesn't typically have a huge impact on your score, but they can lower it by a few points.

Here are some additional questions to help give you a better idea of this segment.

  • How long has it been since you applied for a new account or credit card?
  • How long since you opened up a new account?
  • What type of account did you open?

Depending on these answers, the new credit portion of your credit score will be adjusted accordingly.

Chapter 3:

What Causes Bad Credit?

There's a difference between no credit and bad credit.

Chapter: What Causes Bad Credit?

Now that you know how your credit score is determined, it's time to take that discussion one step further and see what specifically causes bad credit.

I'll explain in detail all of the potential reasons why you might have bad credit.

Once you're able to identify the cause of your bad credit, it will be easier for you to correct and improve your credit score.

Late Payments

You need to pay what you owe each month—on anything and everything that's reported to the credit bureaus.

That can include things like the following:

Credit cards

Mortgage

Car loans

Utilities

Installment loans

Student loans

If you've been unable to pay some of your bills on time, it's going to hurt your score.

As we already saw, your payment history makes up 35% of your credit score, so a long history of late payments will cause your credit score to drop.

And one of the best ways to start turning things around is to do what you can to make all your payments on time—later on, we'll get into some options that can help you with this.

Missed Payments

Late payments eventually get paid, but if you miss a payment completely, it's much worse.

Now you'll end up owing more money from interest charges and potentially penalty fees for these missed payments.

Payments and fees can start piling up and turn into a snowball effect that's hard to recover from.

Plus, all of these missed payments will be documented on your credit report and hurt your score.

Defaulting on Loans

Loans don't necessarily default after just one late or missed payment. You usually have 30 days or so after the due date to make the payment without defaulting or incurring a penalty.

But lenders can take legal action if you fail to meet the agreement terms. If you're worried that you could miss a payment, there are certain ways that you could avoid defaulting on your loan.

Just not paying without saying a word is a mistake, as the lender will be more inclined to take further legal action or send your file to collections.

But if you reach out and speak to the lender in advance, you could potentially work out an alternative solution.

This may not work all of the time, but it's definitely worth a shot.

If a lender decides to give you some leeway or grace period, just don't take their word for it.

Always document everything and put the new agreement in writing.

Foreclosure

Foreclosure has the same effect on your credit score as loan defaults.

It's simply a default on your mortgage loan, where the lender then takes possession of your house.

If this happens, lenders will see that you struggled to make regular payments and they will view you as high risk which can cause a drop your credit score.

Applying for Too Much Credit

Applying for too much credit simultaneously or in a short period of time hurts your score.

Remember, the length of your credit history is a factor in your score, so adding too much new credit will change your average length of credit, therefore lowering your score.

Also, each new credit inquiry gets added to your credit report.

Lenders will see these inquiries and may be less inclined to offer you a bad credit loan, possibly worrying that you're taking on more credit responsibilities than you can handle.

Having Your File Sent to Collections

Delinquency Rates Across Several Debt Types

In the event of missed payments or loan default, lenders could sell your debt to a collections agency, although this doesn't happen overnight.

Typically it takes 30 days before the wheels get put in motion and when your late payment is likely to officially be reported as a delinquency.

Then, the lender will start to make phone calls and probably send letters or other notices in an attempt to collect.

After 180 days or so, they might give up these efforts, and that's when your file gets sent to collections.

Creditors can hire a debt collector but often they simply sell your delinquent debt to third-party debt collectors, who will pay your creditor a portion of the debt to take over your file.

Even though the lender won't be repaid in full, they'll still get something—which is better than nothing!—and they no longer have to spend time and money trying to obtain payment from you.

After this happens, you'll start getting notices from a different company.

If your file is sent to collections, it will appear on your credit report and will definitely hurt your credit.

Potential lenders whom you may approach in the future wouldn't want to deal with this kind of headache.

Charge-offs

If you haven't been making payments for a long period of time, the creditor may assume that you have no intention of paying back what you owe.

As a result, they could suspend your account and turn off your line of credit.

A simple example of this happening is with credit card companies, where, f you can't make payments, then you can't use the card anymore.

This will give you bad credit for a few reasons.

First, the charge-off on your credit report hurts your score.

And second, the amount of your total credit gets lowered.

As a result, your utilization ratio increases and it hurts your score even more, so take whatever steps necessary to prevent this from happening.

Judgments

Judgments occur when legal action is taken against you to repay debt and these will definitely appear on your credit report.

If you've had any judgments, you'll get an official summons to appear in court, and when this happens, a judge could potentially rule against you and force you to pay off your debt.

There may be scenarios when you didn't pay because of circumstances with a lender where you felt you were wrong or the agreement was breached, so the judge could rule in your favor.

But once you're legally told to pay, you need to do it if you want to save your score, since unpaid judgments are much worse than paid judgments.

If you pay your debt after a hearing, the judgment will still be on your report, but it won't hurt as bad if it's left unpaid.

Plus, after your judgment is paid, you could appeal the mark on your credit report, and I'll walk you through how to do this in the section on credit reports.

Bankruptcy

Even if you have bad credit, filing for bankruptcy should be your absolute last resort.

When you file for bankruptcy, you're basically telling lenders that you won't have the money to repay them, which then signals to future potential lenders that they may not get repaid either.

Chapter 7 bankruptcy: This is often called straight bankruptcy, complete bankruptcy, or liquidation bankruptcy.

In this scenario, all of your "nonexempt" assets are sold to pay off your existing debts and any amount remaining is then waived.

Chapter 7 bankruptcies stay on your credit report for ten years!

Chapter 13 bankruptcy: This is a negotiated settlement between you and your creditors, also called wage earner's bankruptcy.

For most people, this is often the best bankruptcy option, as it allows you to keep assets such as your home.

If you can come to a successful agreement with your lenders, you will end up with an agreed upon payment plan, usually over 3–5 years.

This will then protect you from foreclosure, wage garnishment, and other legal actions, as long as you can keep up your agreed payments.

Chapter 13 bankruptcies will remain on your credit report for seven years.

Whether you file for chapter 7 or chapter 13, both of these will crush your score, and you'll have a hard time getting loans from traditional lenders after filing for bankruptcy until it drops from your credit report.

That said, there are still multiple non-traditional options open to you, so if you've already gone through bankruptcy, it's not the end of the world.

You can still be eligible for a bad credit loan and you can still catapult yourself into a good credit score.

Chapter 4:

How to Improve Your Credit Score

If you're already suffering from bad credit, you can start turning it around today.

Chapter: How to Improve Your Credit Score

Regardless of your current financial situation, improving your credit score will help increase your chances of getting approved for a bad credit loan.

The specific length it will take to improve your credit score depends on several different factors.

Everyone would love to boost their credit score overnight but that's not always realistic. Some of the methods take a little bit more time and effort.

With that said, there are certain steps you can take that can improve your credit score in 30 days.

This can seem like a daunting task for anyone who has never done this before, especially if your score is really low.

But you're not alone—and just because your score is low right now, it doesn't mean that you're doomed for life.

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The process is fast, secure, and there is no charge to find a lender. All credit types are welcome and the funds could be deposited directly into your bank account as soon as tomorrow.

Get a Bad Credit Loan

Here are tips to help you increase your credit score.

Review Your Credit Report

All too often I see people surprised when they hear from a lender about certain parts of their credit report.

You should check and review all of this information before applying for a bad credit loan.

Legally, you're entitled to a free copy of your credit report every 12 months and annualcreditreport.com is a government-authorized website where you can pull your free copy today.

Review your report and check for any errors.

If you do see mistakes, you can dispute them for removal.

Otherwise, negative marks can remain on your report for up to several years.

You may even see something on there that is showing as unpaid, but you know that you paid it, and that's definitely a reason for a dispute.

Here are the key areas you should review to ensure there are no errors:

  • Your name
  • Address
  • Employment information
  • Social Security number
  • Account numbers
  • Balances
  • Dates
  • Account statuses
  • Payment statuses
  • Credit limits
  • Discharged debts
  • Duplicate accounts

Disputing errors on credit reports

Under the Fair Credit Reporting Act, you can dispute a claim yourself. To do so, make sure you follow these simple steps:

  1. Write to the reporting company. Don't email. Don't call.

    Here are the mailing addresses for each of them:

    Equifax – P.O. Box 740256, Atlanta, GA 30374

    Experian – P.O. Box 2002, Allen, TX 75013

    TransUnion – P.O. Box 2000, Chester, PA 19022

  2. You may also want to make it a certified letter which will give you a record in case your dispute doesn't get resolved. You don't want them to claim they simply never your letter.

  3. Write one letter per error. If you find more than one issue, make sure they're addressed in separate letters.

  4. Explain what the error is and include a copy of your credit report with it highlighted.

    The FTC (Federal Trade Commission) had a sample dispute letter that you can use as your template:

  5. Include photocopies of any supporting documents for your claim.

  6. Equifax and TransUnion will also require you mail in a dispute form accompanying the letter, while Experian does not. These forms can be found on their websites.

  7. Ask them to either correct the mistake or remove the entry.

  8. Make sure you keep copies of everything.

  9. Contact the source of the error as well. This means the original lender such as your credit card company, bank, etc.

  10. Sent them the same dispute letter and supporting documents you sent to the credit bureaus.

  11. Make sure you specifically ask them to correct it.

Credit bureaus have 30 days to respond to any dispute letter.

Usually, in the interest of time, the bureaus would rather delete the disputed claim then address it directly.

If some blemishes are left undeleted, you can simply re-submit those letters until they're gone, at no risk to you!

You should see a measurable increase in your credit score within a few weeks.

Removing Negative Marks

Even if there is something on your credit report that you're guilty of, you can still sometimes get it removed, especially in the case of late payments or charge-offs and collections that have since been paid.

Simply write a letter to the creditor or collection agency and ask them to remove the entry from your report.

If you're still a customer and you're now caught up on payments, this has a better chance of working.

Negotiating Amounts Owed

Do you have any amounts in collections or reported as charge-offs that you have not paid?

If you can afford to, you can negotiate with your creditor, such as telling them that you will pay the balance you owe if they agree to delete the entry from your credit report.

You will need any agreement in writing, to make sure they follow through.

Getting errors or negative remarks off your credit report is one of the quickest ways to boost a bad credit score. In fact, it can boost your score within as little as a few weeks.

This is what credit repair companies do for a fee, but you can do it yourself at no cost, other than a little time and effort.

Pay Down Debts

If you've got money to pay off anything that you owe, use it.

I realize that it may not be possible to pay off everything.

Payments for things like your house or car are usually pretty substantial, and most people don't have that kind of cash just laying around.

But pay off what you can, such as things like credit cards and medical bills.

Paying off your debt will lower your utilization ratio and help improve your credit score.

Request Higher Credit Limits

This may not be something that crosses your mind right away, but if you have open credit limits, you can ask for an increase.

Refer back to the "amounts owed" factor of your credit score.

A major part of this factor includes your debt utilization ratio, which is the total balance that you owe, divided by your total limit.

By increasing your credit limit, the utilization percentage will get lowered.

A general rule of thumb is that you never want this percentage to be higher than 40%, but in a perfect world, you'll keep it under 20% if you want to increase your credit score fast.

Just because you get approved for a higher limit, it doesn't mean that you should increase your spending. In fact, you should do the opposite.

Don't Cancel Open Credit Lines

One big mistake that I see people make all of the time is, after finding out they have bad credit, they just cancel some credit cards.

This won't help you because, as I just explained, it will hurt your utilization ratio.

The less amount of credit you have, the higher your percentage will be and the lower your credit score will end up.

Average Credit Score By Age 2017

If you feel like you need to close an account, do it with cards that have a small limit, like cards issued from a retail store, and always keep your oldest cards open, since this relates back to the length of your credit history.

Closing a card can hurt your score because it reduces your overall length and the average length of credit.

Make Payments On Time

Late payments can crush your score, so you need to do whatever it takes to meet your payment deadlines.

And don't just pay the minimum due. Always try to pay as much as possible.

In a perfect world, all of your payments will be made in full.

If you can't afford to make your monthly payments, then you need to reassess your budget and look for ways to either cut costs or increase your income.

If you struggle to remember when everything is due, I recommend setting up automatic payments.

Don't Open Unneeded Credit Cards

Earlier I explained that increasing your total available credit can lower your utilization ratio and ultimately improve your score.

While this is true, it doesn't mean that you should just request new cards in an attempt to increase your limit.

Simply asking for credit increases from your existing credit lines is much better for your score if you have bad credit.

Consolidate your debt

A final option is to consider debt consolidation, which can allow you to combine several higher-interest balances into one with a lower rate payment.

That way, you can get rid of debt without increasing payments.

Move debt off higher-interest charging cards—and then all of your payment dollars can go straight to the principal.

Using a bad credit loan for debt consolidation is a great way to potentially lower your interest rates, manage your payments, and improve your credit score all at the same time.

Chapter 5:

Types of Personal Loans

Before you look for a loan, check out the complete list of options available to you.

Chapter: Types of Personal Loans

Not all loans are created equally. There are certain loans that are specific to circumstances and situations, like what you'll be using the money for.

Certain lenders offer different types of personal loans.

Your credit score will play a factor in the type of loan you apply for as well.

Always shop around for the best rates and loan terms.

In this section, I will walk you through the most common loan options available.

Unsecured Personal Loans

Unsecured loans are traditional and extremely popular.

Lenders will give you a loan just based on your credit score and report.

You can use the funds from an unsecured loan for nearly anything and you don't need to put up any type of collateral.

Typically, unsecured loans are available for people with good credit but, even if you have bad credit, you still may be able to qualify for an unsecured personal loan, though the terms may not be in your favor.

The interest rates could even be nearly double or triple the amount of someone with "Excellent" credit.

So you need to weigh those options and consider other types of bad credit loans if the interest rates of an unsecured loan are going to be too high.

Secured Personal Loans

Just as the name implies, you need to secure your loan with some type of collateral—essentially borrowing against your assets.

If you miss payments or default, the collateral can be seized by the lender.

Common types of collateral secured through traditional lenders would be a car, house, or boat—anything that's valuable that you own with the most equity.

Your savings accounts and stocks can also be used as collateral for secured loans.

If you have bad credit and can't qualify for an unsecured loan, or if you qualify but the terms are unfavorable, a secured loan may be your best option.

You'll get better interest rates because you're willing to risk your assets.

Lenders won't see you as much of a risk when you're willing to borrow against your equity.

Let me quickly explain how this works:

Rather than borrowing the amount of the purchase price of your house or car, the loan is based on the fair market value if the collateral were to be sold today.

Expect lenders to estimate that value slightly lower, then take that number and subtract the amount that you still owe to determine the amount that you can borrow against.

So, if your house is worth $250,000 on the market today, and you only owe $100,000 on your mortgage, then you could borrow up to $150,000 (assuming you found the right lender).

There are also some drawbacks of secured loans, such as failure to repay the loan resulting in the loss of your collateral.

Don't apply for these if you don't think that you can make the payments, as this could have a major impact on your life if you lose your vehicle or home.

Debt Consolidation Loans

Debt consolidation loans are great for people with outstanding balances to different lenders.

Instead of making separate payments to each one, you can apply for a debt consolidation loan to repay all of that debt and then just make one payment based on that amount, plus interest.

For the most part, debt consolidation loans offer lower interest rates than the combined rates of everything that you were previously paying, which is what makes them so appealing.

Obviously, if the terms aren't favorable, then it's not in your best interest to do this.

But, if you can find a debt consolidation loan with lower interest rates, it will save you money and help keep you organized and simplify your payments since you're just making one instead of several.

Personal Lines of Credit

A personal line of credit is similar to a credit card. Instead of getting a lump sum of cash from a lender, they'll give you a line of credit.

You'll use that credit line to borrow money as needed.

One of the most appealing factors a personal line of credit is that you only pay interest on what you borrow, rather than the entire amount of the credit line.

So, if your line of credit is $5,000 and you borrow $1,500, you'll only pay interest on the $1,500.

Obviously, this will save you lots of money on interest charges.

Even if you don't need money right now, it still may be a good idea to open a personal line of credit, and then you'll have it available in case of an emergency.

Also, you can use your personal line of credit for ongoing expenses and recurring costs.

If you don't need the funds today, you may need them in the future.

It's easier to just dip into your personal credit line than it is to go through the loan process at that time.

But for those of you that just need some cash for one specific expense, a personal line of credit is probably not your best option.

Fixed-rate Loans

This is a very simple concept.

The monthly payments and interest rates are the same for the lifetime of your loan.

It's a fixed amount, just like the name says.

This is the best option for people that want to make the same payments each month, since locking in a fixed rate could save you money if interest rates rise.

It's also easier to budget for fixed rates since you'll know exactly what needs to be paid each month.

Variable-rate Loans

Variable-rate loans are different. As the name implies, your interest rate can change.

Here's how it works: The banks set a benchmark rate, which gets tied to your loan, and any time the benchmark rate fluctuates, so does the rate of your loan.

As a result, the interest rates and monthly payments can change from month to month.

The benefit of variable-rate loans is that if the interest rates drop, you'll have lower monthly payments.

Obviously, the drawback is that if the rate rises, so will your payments.

You can potentially set up variable-rate loans with cap limits, which sets a maximum amount that the rate could change over specific periods or in the lifetime of the loan.

Variable-rate loans are better options for short-term loans if the rate is currently low because there usually isn't a dramatic change in short periods of time.

But the longer your loan terms, the greater chance of larger fluctuations.

Cosigner Loans

If you've got a thin credit history or no credit history, it's common to get a cosigned loan.

In this case, lenders use the credit score of the cosigner to come up with the loan terms.

Who Have You Co-signed For?

If your cosigner has excellent credit, you'll be able to borrow large amounts at favorable interest rates.

When you make payments on your cosigned loan, it helps boost your own credit score.

The downside of a co-signed loan is that you can hurt someone else's credit score, as the co-signer becomes equally responsible for repayment.

If you can't make a payment and they don't pay it either, it will go on their credit report as well as yours, so you need to make sure that you're comfortable asking someone to do this for you.

Cash Advance Loans

Some lenders will offer you a short-term cash advance, which is most often tied to a guaranteed fixed income, such as your next paycheck.

Cash advance lenders most likely won't check your credit.

Instead, they will ask for proof of income, such as a copy of your most recent pay stub.

There is typically no collateral required, but interest rates can be exceedingly high.

If you only need a small loan for a short-term emergency, this may be worth considering, but check out your other options first, so you can try to avoid the sky-high interest rates.

Bank Agreements

Your bank may approve you for a short-term loan or minimal overdraft agreement.

This is dependent on your banking history and ability to keep your account open.

Some banks will offer an overdraft limit tied to a monthly fee, while others will charge you a percentage interest rate.

Speak to your bank to find out what it's willing to offer.

Your chances of approval are better if you've been a long-term client with a strong track record.

Mortgage Loans

Mortgage loans are long-term loans used specifically for buying a home, on which you'll typically make payments for the next 15, 20, or 30 years.

That's why it's so important for you to shop around and these days, it's easier than ever to compare rates by looking online.

You can get pre-approved or pre-qualified for a mortgage when you're looking to purchase a house.

For a pre-qualification, the lender will tell you how much you'll likely be qualified for based on their estimation after asking about some personal facts such as your income and employment.

They may also do a soft credit check.

A pre-approval will entail a hard pull on your credit report, but it results in a lender giving you a letter saying how much you qualify for.

The advantage of this is that it can give you an edge over other prospective buyers.

The letter indicates that you're serious about the purchase and able to afford it.

Mortgage loans typically have minimum credit score amounts as well as a minimum down payment.

Higher down payments will save you money on interest charges in the long term.

Home Equity Lines of Credit

Do you already have a home?

You can use your home specifically as collateral for a home equity line of credit, which is often abbreviated as HELOC, and is a secured line of credit.

This will act like any other line of credit that you may have.

You'll use the funds when you need to, as long as you stay within the limit.

You just need to pay it back on schedule as the terms are permitted with the lender.

Home Equity Loans

In addition to a HELOC, you could also apply for a home equity loan, which gives you a lump sum of cash as opposed to a line of credit.

According to the FTC (Federal Trade Commission), the maximum amount you could borrow on a home equity loan is up to 85% of your home's value, while factoring in the existing mortgage.

When considering you for a home equity loan, lenders often look at the loan-to-value (LTV) ratio, which means they compare the value of the loan being requested to the value of the equity in the home.

The higher the ratio, the less likely you are to be approved, because it's seen as riskier.

Car Loans

As the name implies, car loans are for people who are purchasing or leasing a new vehicle, and you can get these from various lenders, like a bank.

Or you can get financed directly through the dealership that you're buying from.

Again, the more money you're able to put down, the less interest fees you'll pay over time.

Student Loans

Student loans are specifically for students seeking higher education.

Without any income, it's tough for a student to pay for school.

Student loans may be offered by the federal or state government or by private lenders and, in many cases, student loans can also be co-signed by a parent.

With federal student loans, lower monthly payments will translate to higher interest rates.

A standard plan is paid over 10 years with equal monthly payments.

There are other options where payments are low to start and then get higher every two years.

Extended plans are paid off over 25 years.

The payments are lower, but you'll pay much more interest over such a long period of time.

You can also apply for student loans based on income, where you'll pay roughly 10-15% of your income to the loan, but with other factors considered.

Whether you have bad credit or no credit, you can typically still qualify for a student loan if it's used to pay for school.

Home Improvement Loans

This is another loan type that's used for a specific purchase—for homeowners that want to renovate their property.

There are several different types of home renovation loans.

Some are meant specifically for new homeowners, allowing these new buyers to change the structure of the home and make cosmetic changes as well.

Other types of home improvement loans are for people that will not be changing the structure.

Not everyone can always qualify for a home improvement loan, as things like the size and value of the home play a factor.

More expensive homes don't qualify unless an appraiser can say that the renovation will increase the value of the home.

There are specific rural development loans that can be used for safety improvements, where homeowners can use the funds to fix electrical work, siding, plumbing, the foundation, or roofing.

Just because you want to make a home improvement doesn't mean that you should automatically apply for this.

You may be able to get better interest rates with another type of loan or line of credit, so make sure you shop around.

Chapter 6:

Where to Get a Bad Credit Loan

Now that you know the different types of loans, it's time to figure out where you're going to apply.

Chapter: Where to Get a Bad Credit Loan

When you have bad credit, it's important to shop around so that you can find a loan with the best terms for your scenario.

These are the six primary lenders where you can find a bad credit loan with guaranteed approval:

Banks

Banks are the most traditional place to get a loan, so starting your search at your local bank is reasonable, but don't settle on a decision.

Shop around.

You can expect banks to have higher interest rates, especially for people with bad credit. After all, that's how they make money.

So while a bank may be a good place to start looking, it may not end up being where you ultimately get your bad credit loan.

Credit Unions

Credit unions are a much better option for people with bad credit, as they can typically offer better interest rates than a bank.

That's because credit unions are owned by members and operate as a nonprofit organization, while banks are owned by shareholders that need to see profits.

Your chances of getting approved for a bad credit loan at a credit union increase if you belong to a specific group.

For example, there are credit unions for teachers.

And if you're a veteran, active member of the armed forces, or the family member of a veteran or active duty military, there are great loan options for you.

You can also seek a credit union that's affiliated with your community or employer.

Credit unions may not make a decision based on your credit score alone.

They can make a judgment based on your character.

Plus, credit unions are always looking for people who need loans, so look around and try to find one that fits your specific needs.

Peer-to-peer Lending

Another option to secure funds is through online platforms known as person-to-person, peer-to-peer, or P2P lending.

It's a newer type of loan that's been around for less than 15 years.

Just find an online platform and get a loan directly from an individual investor as opposed to a credit union or bank.

This is a great option for people with bad credit.

That's because these investors are used to dealing with people who have low credit scores, knowing what they are getting into when they join these platforms, and they'll be more flexible than a bank.

While you shouldn't expect to see extremely low interest rates, the rates will probably still be better than traditional lending options if you have bad credit.

Alternative Lenders

P2P Lenders are just one kind of alternative lender on the market today.

There are also private lending organizations providing offline and online loans to individuals with bad credit.

For example, OneMain Financial is a huge personal loan provider with online services, as well as almost 1,600 branch locations across 44 states.

It is not a P2P lender but, unlike a bank or credit union, OneMain Financial only offers personal and auto loans. You cannot get other services through it, such as a checking or savings account.

There are also a number of online alternative lenders specializing in fast microloans so, if you need a small loan right away, this may be a better option than a cash advance company.

Family and Friends

As we previously discussed, you can apply for a cosigned loan.

If you need someone to vouch for you, it's likely going to be a family member or a close friend, but they may not be comfortable with this type of loan because if you fail to repay, it will hurt them as well.

So rather than going through the co-signing process, you could potentially get a loan directly from your family or friends.

These won't have interest rates, and the payback terms can be flexible.

But you need to ask yourself if this is something that you want to go through with, since you won't want to make things awkward or damage a relationship because of the money.

Write everything down, just to make it official, document the loan amount, terms, and consequences if you don't repay and treat this as a legal document.

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What to Watch Out For

Here are red flags you should watch out for when shopping around for the right lender:

Website isn't secure. Never send sensitive information through an unsecured website. Look for it to start with https, not http.

Read the fine print. A legitimate lender should include their privacy policy, terms and conditions, and other legal disclosures somewhere on their website.

No terms listed. Is there a clear amortization schedule or listing of loan terms on the website? A reputable lender should be able to give you this information and explain what your loan is going to cost you and what happens if you are late with your payments.

Poor online presence. Most lenders have information about themselves online, such as a website, customer reviews, a social media presence, etc. If you can't find any of these things, it might be a good idea to look for someone else.

They pressure you. Are you feeling pressure to sign papers? Are they pushing you to sign-up? A true lender will allow you to review paperwork.

Company registration. Make sure your lender is linked to a bank and registered with bureaus like Equifax.

Deposits. Be wary of any online lenders that demand an upfront deposit. There are legitimate institutions that may ask for security—but this can also be a scam.

Customer reviews. Check customer review sites, such as consumeraffairs.com, to see what past customers say. Also, go to the Better Business Bureau (BBB) to see if the company is accredited and what it's rated at.

If the company is questionable, you'll likely see a lot of comments about it being a scam.

Chapter 7:

FAQs

Read through some frequently asked questions about bad credit loans:

  • Can you borrow money with bad credit?

    Absolutely. Read through the section on "How to get approved for a bad credit loan" for more information.

  • Are there loans specifically for people with bad credit?

    Yes. There are even some lenders who specialize in providing loans to people with bad credit.

  • What is a fresh start loan?

    A fresh start loan is simply another term for a personal loan targeted at people with bad credit or who have been through bankruptcy.

    It's marketed as a way to help you get a fresh start, and recover your credit score. It can be a secured or unsecured personal loan. Terms and rates will depend on the individual lender.

  • How do I find a loan when I have bad credit?

    One easy solution is to let CreditLoan help you. Apply directly through our site, and we'll help match you with a qualified lender, at no charge. You can also check out the section on where to get a bad credit loan for some other options.

  • How fast can I improve my score?

    This depends on what's dragging down your score in the first place. In some cases, you can boost your score in a month or less. However, things like bankruptcy can stay on your report for up to ten years. Take a look at the section on how to improve your score, for more information.

  • What is an origination fee?

    An origination fee is a charge that a lender tacks onto a loan for covering processing charges. It's an upfront fee you need to pay before receiving the loan.

    This may be a flat rate of a percentage of the loan. However, there are plenty of personal loans that do not charge any origination fees. Make sure you read the fine print and shop around.

  • What is a prepayment penalty?

    A prepayment penalty is a fee you will be charged for paying your loan off early. Not all loans have this. And in some cases, it has a set time period. Such as that you will face a penalty for paying more than 20% each year, or by paying it off before three years, etc.

  • What is an installment loan?

    An installment loan is simply a loan that you pay back through fixed, equal installments. Most personal loans are installment loans.

  • What's the difference between a cosigner & authorized user?

    A cosigner is a joint account holder. Their main purpose is to help the primary borrower get approved. Co-signers are legally obligated to the loan if the borrower defaults. You can read more about co-signers in the cosigner loans section.

    An authorized user is someone who is jointly able to use your credit, but has no liability to repay it. Loans do not have authorized users, as the money gets deposited straight into your bank account. However, a line of credit may allow for an authorized user to be named.

Chapter 8:

How to Get Approved for a Bad Credit Loan

11 actionable steps to make sure you'll be approved for your next loan.

Chapter: How to Get Approved for a Bad Credit Loan

There are ways to get approved for a loan even with a bad credit score.

Here's what you should consider before you apply.

Is Your Credit Score Was Average Or Above Average Survey Results

1. Find the Right Lender

There are lots of different places to get a loan.

  • Banks

    Banks

  • Credit unions

    Credit unions

  • Peer-to-peer lenders

    Peer-to-peer lenders

  • Online lenders

    Online lenders

  • Family and friends

    Family and friends

  • Pawn shops

    Pawn shops

Depending on your scenario, each one will have its pros and cons.

You may be able to eliminate some of these lenders right away.

Banks aren't the best option if your score is really low, unless you can find a cosigner or have assets to borrow against. Otherwise, you'll have better luck at a credit union or with online platforms.

Find a lender that's legitimate and trustworthy.

Don't fall for some online cash advance scam from a "lender" that's promising you an unrealistic amount and rate based on your bad credit score.

2. Get a Cosigner

A surefire way to get approved, and get the best rates, is to find a cosigner with excellent credit.

Here are some traits you should consider looking for in a cosigner:

  • Someone you have a long-standing relationship with. And who you trust. Such as your parent, guardian, relative, or spouse.
  • Someone who understands and supports your financial goals.
  • A person who has a good payment history and a strong credit score.
  • Someone with stable employment.

3. Borrow Against Your Assets

Consider applying for a secured loan.

You could put up any of the following as collateral:

  • House

    House

  • Car

    Car

  • Boat

    Boat

  • Stocks

    Stocks

  • Savings

    Savings

If a lender sees that you're willing to secure your loan with these types of assets, they'll be more willing to work with you, even if you have bad credit.

Figure out how much equity you own in your assets.

You can borrow up to that amount and get more favorable rate terms.

Paying off your secured loans on time will also boost your credit score.

4. Consider a Home Equity Line of Credit

You can use your home specifically as collateral by applying for a home equity line of credit, which is often abbreviated as HELOC.

This will act like any other line of credit that you have, and you'll use the funds when you need to, as long as you stay within the limit.

You just need to pay it back on schedule as the terms are permitted with the lender.

In addition to a HELOC, you could also apply for a home equity loan, which gives you a lump sum of cash as opposed to a line of credit.

According to the FTC (Federal Trade Commission), the maximum amount you could borrow on a home equity loan is up to 85% of your home's value while factoring in the existing mortgage.

By using your home to secure the loan, it increases the chances that you'll get lower rates and qualify, regardless of your low credit score.

5. Check for Mistakes on Your Credit Report

If you have a low credit score and it doesn't seem right based on your credit history, you should take a deeper look at your credit report.

You might find an error.

It could be a wrong address, misspelled name, duplicate account, or some other mistake, all of which may seem minor, but could confuse the lender and lead to a rejection.

You'll put yourself in a better position if you get mistakes squared away before you apply for a bad credit loan.

There are also mistakes that could directly drive your score down, such as:

  • Late payments
  • Closed accounts showing as open
  • Paid bills being reported as unpaid

So just check the report in its entirety for accuracy and get any errors removed.

6. Provide Proof of Income

Lenders are letting you borrow money, but they need to know that they're going to get that money back, plus the interest.

The best way to show that you can repay a bad credit loan is with a steady job.

But just because you got a paycheck last week, it doesn't necessarily prove job security.

So in addition to recent pay stubs, you should also be prepared to show tax return documents from previous years, like W2's and 1099 forms.

The longer you've been at the same job, the better your chances of getting approved.

But if you have big gaps in your employment history and several different jobs over the past couple of years, lenders can see that as a risk.

Losing your job would likely result in the lender not getting their money back and they don't want to take those risks.

Even if proof of income isn't required for certain applications, have this documentation prepared anyway.

Showing this to a lender lets them know that you're serious about the loan and responsible.

7. Apply for a Loan That Fits Your Needs

We talked about different types of loans before.

You need to do your research to make sure that you apply for the best loan based on your scenario.

I'll give you a couple of examples to show you what I'm talking about.

Let's say you live in a rural development area and need a loan to repair your roof as a safety measure; there are loans out there for that specific need.

If you applied for just a general line of credit, then your chances of getting approved wouldn't be as good.

If you want a loan to buy a new car, you won't apply for a student tuition loan. See what I mean?

It may seem obvious, but people apply for the wrong loans all of the time, and that's the reason why they get rejected.

But applying for the right loan will increase your chances of getting approved, even if you have bad credit.

8. Only Ask for the Amount You Need

Let's say you need $5,000. Don't apply for $20,000.

People make this mistake all of the time, and it's why they get rejected.

Explain to the lender exactly what you need the money for and show them how much it will cost.

That's all you should ask for, because thinking that the extra money is going to help you out is a big mistake.

First of all, even if you got approved, you'd pay much higher interest charges.

But second, and more importantly, a lender isn't going to be comfortable loaning you huge amounts of money, especially with bad credit.

The larger the loan amount, the greater the risk.

Someone who is already perceived as a potentially high-risk borrower has a much better chance of getting approved for a lower amount of money.

9. Only Apply for One Loan at a Time

Applying for multiple loans simultaneously does not increase your chances of getting approved.

In fact, it will have the opposite effect.

Each time you apply for a loan or new credit, an inquiry gets placed on your credit report and if a lender sees you applied for multiple loans at once, they'll see that as a red flag.

They'll wonder why you would need so much money and if you had some kind of ulterior motive, which makes you a higher risk.

If you are going to owe money to multiple lenders at once, how could a lender be sure that they'll get repaid?

It's easier for them to reject your application than to deal with that kind of a headache.

So take your time, do your research, and find the loan that best fits your needs from a lender that's trustworthy.

Just apply for one loan, and it will increase your chances of getting approved.

10. Pay Off Debt

Too much debt can hurt you. This relates back to your utilization ratio, which is how much credit you use over how much credit you have.

Lowering that percentage can not only boost your credit score, but it will also make lenders feel more comfortable.

Knowing that you owe less is good for them because they'll have a better chance of getting their money back.

But if you owe too much to lots of lenders, they may not want to give you a new loan.

I'm not saying you can just completely eliminate your debt with the snap of a finger, which is probably not realistic.

Obviously, things like student loans, car payments, and mortgages can be too high to pay off right now and that's fine—lenders understand that.

But if you're spending thousands of dollars on your credit cards each month and only paying the $30 minimum and racking up interest charges, it's not going to help you get a bad credit loan.

So start by paying off those high-interest credit cards before you apply for a new loan.

Pay off your medical bills, retail store cards, and past due utilities as well.

Lenders often look at your debt-to-income ratio when evaluating you for a loan, which is the amount of your monthly debt payments divided by your monthly gross income.

Aim for a debt-to-income ratio of 36% or less to increase your chances of approval.

11. Double Check Your Application

In addition to mistakes on your credit report, you also want to look for errors on the application itself.

If you did something wrong or used an incorrect form, it could be the reason why you get denied.

Credit Reporting & Repair Services Complaint Breakdown

A seemingly harmless mistake could cost you the loan if certain things don't add up, but let me take this one step further:

Never lie on your application.

Intentionally submitting wrong information is a fast way to get denied, since these loans are based on trust.

If a lender catches you in a lie, there is no way that you'll be trusted with their money.

Plus, a lender won't just look at your application and assume that everything is true.

They'll investigate on their own, so it's better to be straightforward and transparent.

Even if you think something hurts your chances of getting approved, it's better that the lender hears about it from you as opposed to you trying to lie about it.

Chapter 9:

Good Reasons to Apply for a Bad Credit Loan

You know that you need some money; but should you take out a bad credit loan?

Chapter: Good Reasons to Apply for a Bad Credit Loan

If you have bad credit, applying for a loan may not be in your best interest (pun intended).

But with that said, there are still plenty of good reasons to apply for a bad credit loan.

Before you apply, refer to these to see if your reason made the list.

Debt Consolidation

Debt consolidation is great for people who have lots of different debts, as they can make one fixed monthly payment instead of several.

This is much easier to budget for, and typically have lower interest rates.

If you can find a debt consolidation loan that saves you money on interest, it's definitely a good reason to apply.

It's a viable option for those of you that have multiple credit cards with outstanding balances.

Boost Your Credit Score

We talked about this when we discussed the factors that impact your credit score.

Having a loan has its benefits.

It increases your total amount of credit, which has a positive impact on your score.

If you can make payments on time every month, it will show a good history of payments made, and it also gives you a mix of credit types if you don't have much diversification.

If you can afford to make the payments including interest each month, it could be worth it for you to apply.

Prepare for an Emergency

In the event of an emergency, it may be tough for you to come up with money fast.

Let's say you lose your job, get sick, or have some kind of unexpected expense that your insurance company doesn't cover.

Rather than going through the loan application process at that time, you could do it now.

Looking for a loan at the last minute with other things on your mind probably won't land you the best one, so do some shopping around now.

You don't want to empty your savings account to pay for an emergency, so get a loan and pay some interest—it will save you a headache in the future.

You could also consider a line of credit for an emergency. You won't pay any interest until you borrow. The great part about this is that you'll only pay for the borrowed amount, as opposed to the maximum line of credit.

Big Purchases

There comes a time in our lives when we need to make big purchases.

I'm referring to things like a home, boat, car, or RV, which are obviously expensive, and it's unlikely that you'll have the funds to buy these outright with cash.

So taking out a loan to help you pay for a big purchase is definitely a good reason to apply.

Medical Expenses

Unfortunately, bad things happen, and you need to be prepared for these scenarios.

You could get sick, break a bone, or pass out somewhere and need to take an ambulance ride to the hospital.

I'm not saying these this to sound morbid, but it's just a reality of what could happen—and medical bills can add up quickly.

If you get stuck with something that you can't afford and your insurance won't cover it, it's a good time to apply for a loan.

Big Events and Projects

There are other times in your life when you need to spend money on a project or an event.

I'm talking about things like wedding expenses or a big move, which can be tough times to come up with cash on your own.

Taking out a loan could help.

You could even use a loan to pay for a vacation (but I can't say that I recommend that!)

Don't get me wrong. I'm not saying that you don't deserve a week off of work. But rather than flying somewhere and staying in a hotel, consider driving somewhere and camping to save money if you have bad credit.

You can also use a loan to fund a home improvement project or home repairs.

Divorce

Divorce is expensive, no matter how you look at it.

According to a survey conducted by Experian, the average financial loss resulting from a divorce is close to $20k.

You may need a bad credit loan simply to help you get back on your feet.

Knowing you have the money to help you put your life back together after such a big change can be priceless.

After all, if you're dealing with the stress and worry of a medical emergency, a home repair, or a divorce, the last thing you want is to be worrying about money on top of it all.

When life throws you a curveball, a bad credit loan can help you get back on your feet.

On the brighter side, it can also help you celebrate and move into the next stages of your life.

Like tying the knot in front of all your family and friends, expanding your house to make room for the baby on the way, or even going back to school to start that new career you've been dreaming about.

Ready To Get A Bad Credit Loan?

The process is fast, secure, and there is no charge to find a lender. All credit types are welcome and the funds could be deposited directly into your bank account as soon as tomorrow.

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Chapter 10:

How to Pay Off a Bad Credit Loan

7 strategies to make sure your bad credit loan helps you improve your credit score.

Chapter: How to Pay Off a Bad Credit Loan

Great news! Your bad credit loan was approved.

But now you're obligated to pay the money back, plus interest, which could seem like a daunting task.

Still, it needs to get done.

Paying off your bad credit loan has lots of benefits. It will improve your credit score and put you in good standing with the lender if you need another loan in the future.

Failure to repay the loan will have consequences, which will definitely hurt your credit score.

Plus, you could lose collateral if you secured your loan with assets.

We definitely don't want that to happen, so here is the best way to pay off a personal loan fast.

  • Understand Your Loan Terms

    1. Understand Your Loan Terms

    Some of you may want to pay back your loan as fast as possible and I admire that.

    But before you start making extra payments, you need to take a look at the fine print.

    Some loans have prepayment penalties—because lenders want to make money on interest.

    So make sure that your loan doesn't have those penalties attached before you start paying early, or better yet, don't apply for loans with prepayment penalties.

    If a lender won't give you a loan without attaching a prepayment contingency, see if they'll negotiate the terms. Try asking if they'll only have a penalty enforced if the loan is paid off extremely fast, like within six months or a year. After that, you'd be free to pay it in full.

    This will ensure that they'll still make back some money on interest charges.

    If you don't have a prepayment penalty, there are lots of benefits for paying your loan off early.

    First of all, it will save you money on interest.

    You'll also have extra cash on hand.

    You've been used to making these payments every month, but now you can put that money toward something else, like your savings.

    Paying off a loan early lowers the total amount you owe, which improves your credit score.

  • Make Extra Payments

    2. Make Extra Payments

    Your loan payments are going to be due each month, which could be for a fixed amount or variable amount based on the loan and what you agreed to.

    Rather than staying on this schedule, you could make bi-weekly payments instead.

    If you pay every two weeks, that equals 26 payments per year, which is the equivalent of one full extra payment every year.

    But if you can't afford that, consider just making one extra payment per year.

    Just don't save it until the final months when other expenses are high from the holidays.

    Get it over with early if you can.

    Then you could make another extra payment again later in the year if the funds are available.

    Whenever you suddenly have some extra money that wasn't budgeted for, put at least part of it toward your loan.

    This can really help you save money in the long run on interest by cutting down the lifetime of the loan and it boosts your credit score that much faster.

  • Round Up Payments

    3. Round Up Payments

    Don't pay the exact amount each month. Add to it.

    If your payment is $229.31, pay $300 instead. If it's $302.10, pay $350.

    Don't overextend yourself but if you can afford an extra $50–$100 each month, that could be over $1,000 extra by the end of the year.

  • Make Automated Payments

    4. Make Automated Payments

    Whichever payment plan works best for you, make sure to automate it.

    If you're going to pay every two-weeks on the day your paycheck comes in or every month on the due date.

    Whatever it is, set up an automated payment for it through your bank.

    This way, you will never have to worry about forgetting or missing a payment—as long as the money is in your account.

    The consistent regular payment will also reflect well on you with your lender.

  • Cut Expenses

    5. Cut Expenses

    If you can't afford to round up your payments or make extra payments, you need to look at ways to make that achievable, and the first option is to cut down on some of your current expenses.

    You can easily save some money if you stop dining out. Bring a brown bag lunch from home with you to work or make your coffee at home instead of buying it every day.

    You may think it's harmless, but let's say you just spend $5 per day during the work week on coffee and a bagel from a chain coffee shop.

    That's going to cost you $1,300 a year on that alone.

    How much do you spend eating dinner out each week?

    Multiply that by the 52 weeks in a year and see how much you'll save if you stop doing that so often.

    Quick-service Versus Full-Service Restaurants Weekly Spending

    Look at unnecessary costs like cable, consider cutting out just the premium channels, or getting rid of it all together, and opting for a service like Netflix instead.

    Speaking of Netflix, subscriptions add up fast with things like Amazon Prime, Sirius XM radio and on and on.

    Don't overlook large expenses either.

    Consider getting a roommate, carpooling, or simply opting for non-brand name products at the grocery store.

    If you want to pay back your loan, cut out unnecessary expenses and use those funds to repay your lender.

  • Earn Extra Money

    6. Earn Extra Money

    If you can't easily cut expenses, the other option is to make some more money.

    Consider picking up a few extra shifts at work, ask for overtime opportunities, or talk to your boss about what you need to do to get a raise or promotion.

    There are tons of options for making money online, from the comfort of your own home.

    Whatever you do, just make sure that you use the money earned to pay down your loan.

  • Consider Refinancing Options

    7. Consider Refinancing Options

    Depending on your existing loan terms, refinancing may be your best option.

    If your credit score has improved since you initially applied, it might be a good time to refinance because you'll get better terms.

    In order to refinance, you'll need to have a clean payment history or lenders will be hesitant to give you better terms.

    The amount of your loan also matters.

    Be aware that often times, refinancing extends the duration of the loan, but you can always choose to pay it off faster, as long as they don't add a penalty for that.

Chapter 11:

Securing a Bad Credit Business Loan

There are multiple loan options for new businesses as well as existing businesses.

Chapter: Securing a Bad Credit Business Loan

Don't let your bad credit score ruin your business' chance of getting the funding it needs. You need to make money, and your business provides your living.

There are different loan options for new businesses as well as existing businesses.

According to the US Small Business Administration, 63% of small business owners go to a bank when they need a loan. But only 27% of those businesses actually received a loan from a bank.

So if banks are turning you down, you've got other options to get the business funds that you need, even with bad credit.

For example, online P2P lenders are becoming more and more popular for short-term small business loans, but whatever lender you chose to go with, first consider the following, to increase your chances of approval.

Have a Business Plan

To increase your chances of getting approved for a business loan, you should have a business plan, which shows lenders exactly what the money will be used for and how you'll generate enough money to pay them back.

Your finances and marketing plans should all be included in this.

You should outline the coming 3-, 6-, and 12-month terms in your short-term strategy. Also include your 2–5-year plans, even if the loan isn't intended to be for that long.

Your business plan should provide projected sales, expenses, and income. Just make sure that it's realistic based on your sales history and market data.

If you need help creating a business plan, check out the US Small Business Administration website, or look for resources in your area.

Revenue-based Financing

These loan terms are based on cash flow, and there are certain requirements that determine qualification.

For example, you must have a minimum credit score of 550 and gross annual sales higher than $100,000.

Your business also must have a minimum of 5 deposits per month into the business checking account.

If your business qualifies, you could get anywhere from $5,000 to more than $1 million based on your sales. Loan amounts won't exceed 10% of the yearly gross sales of a business.

These can usually get funded pretty quickly.

If qualify, you can get the funds in about a week.

Merchant Cash Advances

Instead of paying a fixed monthly rate for a loan, merchant cash advance loans will take a percentage of future credit card sales.

This is a great option for a small business that has lots of credit card sales.

You'll pay the loan back on a daily basis.

The amounts will vary each day, obviously, depending on the sales, and the total amount owed will be based on the loan, plus interest charges.

Just make sure that you find the right provider since costs can vary drastically for this type of loan and keep in mind that you'll want to secure one that's as cost-effective as possible.

Seek a Credit Partner

Another option is to bring someone else into the business as a partner.

You can then potentially get a loan based on their credit score, similar to having a cosigner for a personal loan.

There are pros and cons to this method.

Adding a business partner will reduce your equity in the business, but they could bring something more to the table besides the funding.

Their expertise and extra set of hands can help you out.

They need to realize that they are responsible if the business can't repay the loan, and it will affect their personal credit, as well as your own.

Be careful when selecting a business partner. Make sure the person is a good long-term fit for your business and for you, and make sure you have any agreement in writing, to avoid potential headaches later.

Equipment Loans

If you need money specifically for business equipment, this is probably your best option. There's a good chance that you'll get approved, even if you have bad credit, and here's why:

The purchased equipment will be used as collateral. So if you can't repay the loan, the lender will seize those assets.

Lenders will typically finance at least 80% of the cost needed to buy the new equipment. In some instances, they could even fund it fully.

You can seek an equipment loan from a traditional lender as well as an alternative lender.

Improve Your Personal Credit

If you don't need a business loan right away, focus on improving your own credit score first.

This will make it easier for you to get a business loan in the future and it will get you more favorable rates.

Remember to check your credit score for errors first. Then, the best way to improve your credit score is by paying off your debt and paying your bills on time.

If you can do these things, your score will increase, possibly even in as little as 30 days.

Chapter 12:

Bad Credit Mortgage Loans

Bad credit doesn't have to stop you from owning your own home.

Chapter: Bad Credit Mortgage Loans

If you're tired of renting because you have nothing to show for it, you can still get approved for a mortgage loan even with bad credit.

Just be prepared to pay higher interest rates.

You may even want to consider waiting to get a mortgage until your credit score improves.

U.S. Mortgage Originations 2017

Remember that higher rates can result in thousands of extra dollars paid over the course of a mortgage.

Close to $70,000 on a $200,000 home with a 30-year repayment term.

That's the difference between bad and excellent credit.

I strongly recommend working on increasing your credit score before jumping into a mortgage.

But if you cannot afford to wait, you do have options.

First, know that having a steady income and proof of employment helps your cause.

Make sure you consult with multiple lenders before signing up for anything, shop around to get the best option for you, and consider the amount you're looking for and what terms are being offered.

FHA Loans

FHA loans are insured by the Federal Housing Administration.

The minimum required credit scores will vary based on the type of loan that you apply for and terms also vary by state.

Down payments and interest rates are based on your credit score.

People with lower scores will typically have to come up with higher minimum down payments to qualify for these loans.

USDA Loans

These loans are offered by the US Department of Agriculture.

They provide loans for rural homes with very specific requirements. Earlier I explained how these loans could be used for home improvements but they can also be used for a mortgage.

Just like FHA loans, these terms will vary from state to state.

VA Loans

These are veterans affairs mortgages.

These loan options make it easier for veterans to secure the required financing to purchase a home and they don't always require a down payment.

Loans come from private lenders that are guaranteed by the Department of Veterans Affairs. Because of this, no mortgage insurance is required.

There are also no minimum credit score requirements for VA loans.

For the most part, any active military, army reserve, veteran, and national guard member will qualify for a VA loan.

The spouse of an armed forces member who died on active duty or from a cause related to their service can also apply.

Although these loans have lower costs, they still have a funding fee, but they are a great option for qualifying people with bad credit.

Chapter 13:

How to Find the Perfect Bad Credit Loan for You

There are tons of different loan options out there; just because you have bad credit doesn't mean you can't get the financing that you need.

Chapter: How to Find the Perfect Bad Credit Loan for You

First, consider your credit score and ways you can immediately improve it.

Check your credit report and look for any errors.

Write a letter and appeal to credit reporting agencies to get unfavorable marks removed.

Then create a budget to figure out exactly how much you need and how much you can afford to repay each month. Only apply for what you need and choose the right kind of loan for the funding you want.

Find the right lender based on what you're looking for and your specific credit circumstances.

Remember that traditional lenders aren't always the best option for people with bad credit, so don't be afraid to shop around and don't wait until the last minute to look for a loan.

Follow the tips that I outlined to help boost your credit score.

If you can raise your credit score, you'll have an easier time getting a personal loan.

Ready To Get A Bad Credit Loan?

The process is fast, secure, and there is no charge to find a lender. All credit types are welcome and the funds could be deposited directly into your bank account as soon as tomorrow.

Get a Bad Credit Loan

Make sure that you're able to repay the amount that you borrow so you don't get trapped in a cycle of bad credit.

Now that you know everything about bad credit loans, why not apply for one? Take a look at some of the best loans available from CreditLoans.com.

We've helped over 2 million consumers get the funds they needed when they needed them—and we can help you too.

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