Debtholders with a below average credit score are often afraid that they will be unable to obtain a personal loan. Raising your credit score in order to meet the standard lending rate is not the only way to receive one. If you have bad credit and wish to get around high-interest rates, here are some tips to consider.
Recognize the Numbers
In order to set a goal for yourself, you first need to know where your credit score falls. A credit score is a number assigned to an account that indicates the lender’s capacity to repay a loan. The credit scores vary depending on the company, but FICO with a range from 300-850 is the most widely used model. A low credit score based on the FICO model is considered anywhere from 300 – 559, a below average score is 560 – 659, and an average score is 660 – 724. Key factors that often affect your credit score involve making heavy use of your available revolving credit, and how much credit history that your account has.
Consider Using a Cosigner
A Cosigner or Co-signer when considering a personal loan, is a person who signs an official document along with the lender. Having a cosigner with a reputable credit score will allow the company to trust that debt will be paid back through either the lender or the cosigner if the lender fails to pay. Missing a payment on the loan will also affect your cosigner’s credit score, so make sure to discuss with them if you feel unable to make a payment. If you cannot find a cosigner you may want to look into a personal loans with no credit checks.
Apply to a Credit Union
A credit union is a nonprofit cooperative whose supporters can borrow from a mutual sum of credit at a low interest. Credit union membership is different from a bank and is operated entirely by its members. It’s common for lenders to seek out a community that allows them to have a similar link, such as working in the same industry or geographical area. Many credit unions will offer the same services as a bank such as checking accounts, savings accounts, credit cards, mortgages, CDs, auto loans, and personal loans.
Tap into Your Home Equity
Your home equity is a line of credit that uses your residence as collateral. If you’re a qualified homeowner with available equity, you can tap into this line of credit. Since your line of credit is based on your home equity, it normally results in lower interest rates than other forms of unsecured credit. You can spend and pay back the funds as long as you’d like during your draw period, the first 10 years of the loan or set of time depending on who you take the loan from.
Taking Back Control
Trying to build up credit when you have none can be discouraging to see your scores so low. Taking out a personal loan with a bad credit score should be part of a solution to your debt problems, and not a way to delay the unavoidable measure of paying your debt back.
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