A personal loan is an excellent choice whenever you need some extra money. Be it for home improvement projects, consolidating existing debt, refinancing a high-interest credit card, or paying for an emergency – it comes in handy when life throws a curveball at you.
When applying for a personal loan, your lender will evaluate your ability to repay it, your income source, and, most importantly, your credit report and score.
Your credit report gives a detailed account of your creditworthiness. A poor score can lead to disqualification of the loan application.
Can you get a personal loan with a low credit score? Let’s find out in this discussion.
What is a Poor Credit Score
If you have bad credit, you’re not stuck in a time loop since you can improve it. For example, you can work on better financial habits, pay off your outstanding debts and rebuild your credit.
In the US, major credit reporting agencies, Transunion, Equifax, and Experian, offer borrowers credit scores ranging from 300 to 900.
According to a 2019 Experian study, more than 16% of US citizens have poor credit scores ranging between 300 to 579.
Depending on your repayment habits and credit history, your credit score typically falls within the range.
Here is a table to illustrate the credit scores.
|Excellent||800 to 850|
|Very Good||740 to 799|
|Good||670 to 739|
|Fair||580 to 669|
|Poor||300 to 579|
How To Get A Personal Loan With A Poor Credit Score
Can you get a personal loan with a poor credit score? The answer is yes; however, with some limitations and the conditions for approval may vary from one lender to another.
Here are ways to get a loan with a poor credit score.
- Provide Collateral
Even though personal loans are generally unsecured credit facilities, it would be difficult to have your loan approved if you have a poor credit score.
You can provide collateral against your application, such as a certificate of deposit, and get a personal loan. In this case, collateral guarantees that you will repay your debt.
- Get a Guarantor or Co-signer
If you have a low credit score, try getting a personal loan with a guarantor or a co-signer. Such a person will append their signature against your loan application.
Subsequently, upon approval, the co-signer bears all the obligations, and failure to repay the loan can impact their credit score.
- Borrow From Institutions that Lend To Borrowers With Low Credit Scores
Most lenders will consider a good to excellent credit rating when lending money. However, some institutions also advance to borrowers with a poor credit rating.
Mostly, these are credit unions that have personal connections with their members.
For example, when applying for Portland Oregon loans with a low credit score, you can consider the credit union alternatives that offer multiple loan facilities to consumers.
There are 500 Credit Score Credit Card options that you can take advantage.
- Borrow From Loved Ones
If all fails, your family, friends, colleagues, or business partners can come to the rescue and lend you a personal loan with no strings attached.
The advantage of borrowing from loved ones is that they don’t consider your credit score when advancing a debt.
In addition, the terms are friendly, mostly with no interest and a flexible repayment period.
Moreover, you can use the opportunity to improve your credit score and qualify for loans in the future.
Tips For Improving Your Credit Score
You can improve your poor rating, get control of your debts and accomplish your financial goals by adopting the following strategies;
- Avoid small debts that can ruin your credit rating. If you have a credit card, refrain from impulse buying and settle existing debts on time.
No matter how small the debt is, it has the potential to ruin your score if it remains unpaid.
- Track your debts by requesting your credit report every six months. You can get a free credit report from the credit reporting agencies by sending a written request via email and providing identification documents.
Further, you can also order an updated credit report by phone, and support will mail you after a quick verification.
Lenders may decline your personal loan application if you have a low credit score. Typically, borrowers with a poor credit score demonstrate a history of not paying their debts or settling bills on time.
If your loan application is not urgent, you can take the above steps to improve your credit score and qualify for a personal loan. However, if it’s an emergency, having collateral or a co-signer can save the day.