While a bad credit can limit your access to financing, that does not mean that it is impossible to obtain one. Though limited, there are still personal loan programs with qualifications that allow borrowers with not-so-stellar credit to get the money they need.
However, many misconceptions about bad credit and personal loans prevent potentially eligible borrowers from reaching out. Here, we reveal some of these most common myths and explain why they should not stop you from pursuing your journey to financing.
Only prime scores can qualify for a personal loan
Yes, it is standard for most lenders to look at your credit score and approve only those who pass certain credit standards. But a large chunk of the borrower market includes many individuals who cannot get access to lending because of their credit misfortune.
Whether your damaged credit is due to a sudden career disaster or a credit error that you failed to dispute, some lenders believe it’s simply not fair for these people to not get the help they need.
Many subprime lenders cater especially to borrowers with bad credit. However, to make up for the risk, most of them charge higher fees on underwriting and interest. There are also other lenders who try to get around the credit problem by allowing you to show other evidence of income or assets that could possibly compensate for the low FICO.
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You need collateral to get a loan
Personal loans are mostly unsecured and do not require borrowers to put down their assets (e.g. home or car) as a collateral for the loan. These kinds of loans allow the lender to get your collateral if you fail to pay off your loan. Personal loans, despite bad credit, lends you the money as long as you pass their qualifications.
Terms of repayment make it difficult to pay back what you owe
While these may be true with predatory lenders – a reality that prompts you to be cautious with who to get money from, lenders who do business right and ensure you can pay back what you owe despite the risk they take in lending you money, do exist.
Your best defense against this dilemma is to make sure you read the fine print before you sign on the dotted line. See to it that the repayment terms are apt to your financial situation. Don’t hesitate to ask any questions or negotiate with your lender if you want to tweak certain parts of the repayment terms.
Lenders are as diverse as their program offerings. As a borrower with a damaged credit, you may have limited options and might need to put in extra sacrifice and effort in finding one that understands your unique needs. After all, lending is a game of risk and you need to play by its rules. However, if you know what to expect and are prepared for it, getting the financing you need is definitely possible despite your impaired credit.