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What effect will having bad credit have on my ability to get a personal loan?
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Having bad credit can have a very big impact on your ability to get a loan. When a lender is considering handing over their money, they don't want to give it to someone who has a bad history of handling money.
However, there are many factors that come into play with this as well, such as how many times you have gotten loans before and if you were on time with those payments. Many people have bad credit because they got behind on credit card bills or had their identities stolen.
Some lenders, especially those you have dealt with before will take into account why you have bad credit in the first place, and if you have evidence to prove that you are working to strengthen your credit rating. It really depends on just how bad your credit is, because even with the factors mentioned, you can still be easily denied for a loan.
All factors considered however, it is highly unlikely that a mainstream lender will approve an unsecured bad credit loan – your best bet is to try a payday lender, a secured personal loan (for something like a car) or to utilize any equity that you have built up in your home.
The absolute best thing to do is to spend some extra time working on your score to build it back up before you ask for a loan. However, that is the perfect scenario and we often ask for loans because we need money in a pinch, or to purchase things that we need immediately.
Unfortunately, those things always seem to crop up at the worst times. There are ways that you can up your chances of being approved, though, such as if you have anything that could be considered collateral, like property or a car in your name that can stand good for itself. If you have this, you have a much better chance of getting a loan.
Also, if you can get someone with good credit to be a co-borrower for you, the bank may grant you the loan.
One thing to remember is that the better credit you have, the lower your interest rates will be. So even though you may still get approved for a loan when you have bad credit, you could end up with a very high interest rate which will cause not only your monthly payment to be higher, but the amount of money that you will have paid out in the long run will be much higher as well.
Because of these effects of bad credit, it would be wise spend as much time working on your score as you can before meeting with the bank.
As far as how you work on your score, simply keep an eye on your credit report for items that are not supposed to be there, pay all bills on time, and make sure you don't use all of the credit that is available to you. Always leave some credit open by paying off as much of your accounts as possible each month.
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