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5 Tips to Get Personal Loans for People with Bad Credit

5 Tips to Get Personal Loans for People with Bad Credit

Getting personal loans for people with bad credit has never been easy. But in the days before the recession of 2007, many more possibilities existed than today. That's because questionable mortgage loans for billions of dollars helped to crash the country's financial system. In the rebuilding phase, lenders are more closely enforcing loan requirements than ever before. However, if your credit score isn't too low, there still are possibilities that can lead to personal loans for people with bad credit.

1. Know where you stand

Go to one of the free credit score sites and get a copy of your credit report and score. One such site is annualcreditreport.com. If your score is below 580, chances that makes it difficult to get personal loans for people with bad credit. But no matter the score, take a look at your credit report to see if there are any inaccuracies. A study in 2004 by the National Association of State Public Interest Research Groups found that 79 percent of all credit reports had some kind of mistake and that 1 in 4 reports had errors so serious they could lead to denial of credit.

2. Start with a relative or friend

That may be uncomfortable for many people, but if someone you know would consider extending a loan, that would eliminate a time-consuming and very difficult search. Financial experts recommend that you reduce any loans with someone you know to writing and include an interest rate. That's designed to make the friend feel a little more comfortable about the situation.

3. Go to your bank or credit union

Two of the best sources to get personal loans for people with bad credit are the bank where you have your money and the credit union at work, if your company has one. The advantage is in familiarity. Even if you don't have a credit union savings account or loan, you are employed by the company and the credit union knows that as long as you work at the company, they are guaranteed their money through a direct withdrawal on your paycheck. The bank doesn't "owe" you a loan because you have a checking or savings account there. But it's possible a bank might relax some standards with a customer it already knows.

4. Search online

Use the information you picked up from your credit report to screen the companies you deal with online to those who appear to work with people with your credit score and general credit record. Be sure to ask for only what you absolutely need and to be ready to explain any inconsistencies or difficulties in your credit report, such as a bankruptcy or collection event. Make sure you check out any company offering a bad credit personal loan online with the Better Business Bureau and never get a loan from an online site if you don't speak to a human being on the phone.

5. Payday loans

If a payday or cash advance loan seems like your only chance to get personal loans for people with bad credit, and you truly believe your situation is very temporary emergency only, then it probably is better than getting no loan at all. Just realize that the Federal Trade Commission and virtually every financial expert in the world points out that payday loans come at extraordinarily high interest rates and can roll over and get you in serious financial trouble. In a nutshell, you borrow an amount plus interest until your next payday. If that's one week, the company holds your check until the next week and then cashes it. However, if you can't come up with the money in a week, another significant amount of interest is added on and you could soon find yourself so far behind that you can't catch up.

Image by: Jason Comely