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One of the most important things to have when you want to become successful in life is financial stability. Most of the time, people dismiss financial stability, thinking they can get by in life with lots of money on hand. However, it’s widely proven that if you don’t handle your finances, a million dollars can vanish instantly.
When it comes to financial stability, most people often associate it with just stashing your money and never using it. That’s one fact that is far from the truth. When you’re financially stable, that means that you get to spend on whatever you want, without having a significant impact on your finances. Admittedly, being financially stable is challenging to achieve these days.
With the pandemic going on, a lot of people are having difficulties with their finances. There’s a lack of jobs and businesses, most are just barely making ends meet. With these difficulties, it’s common for those who are short on money to get a loan.
However, what do you do if you have a bad credit score? Borrowers with bad credit usually opt for direct lender installment loans for bad credit. Here are some tips to increase loan approval and some alternatives for you to consider:
What Is a Credit Score?
First off, you have to know what your credit score is. A credit score is a three-digit number by FICO or the Fair Isaac Corporation. Credit scores enable credit unions, banks, lenders, and other finance experts to tell how much of a risk a borrower can be.
The lower the score, the more likely that the borrower won’t be able to pay back the loan. On the contrary, however, an excellent credit score often has its perks. Here’s a look at credit scores and their categories:
Excellent – 800-850
Very Good – 740-799
Good – 670-739
Fair – 580-669
Poor – 300-579
As mentioned earlier, those with bad credit scores are considered high risk. Being high risk means having difficulties getting a loan approved, higher than usual interest rates, and limited options. With better credit ratings, people within these categories enjoy discounts, flexible payment options, and better rates.
Also, read – 7 Best Credit Cards for College Students in 2020
Getting a Personal Loans for Bad Credit Scores
If you have a bad credit rating, don’t fret. Here are some options that you can consider. Take note, before opting for a loan, always shop for the best rates. Even if you have a bad credit score, there will always be a lender with the best available rates for you.
1. Installment Loans
Installment loans can be both unsecured or secured and are types of loans where a lender lends money to a borrower. The borrower needs to pay back that money with interest in predetermined schedules or “installments.” Most of the time, installment loans are completed within two payments. Depending on the terms agreed upon, an installment loan can even take 30 years or more to finish, with mortgage loans being a prime example of an installment loan.
Borrowers with bad credit should opt for installment loans because of its easier payment scheme. Always remember, only borrow what you need so you won’t have difficulty paying a loan back.
2. Payday Loans
For those fortunate enough to have their jobs during this pandemic, a payday loan may make sense if you’re having difficulty making ends meet. Payday loans or cash advances are loans that you can take out from a legit lender.
Alternatively, you can also take these loans from cooperatives and your company, if they allow loans. These loans are called payday loans because you’ll need to pay them off the next payday. Be wary of payday loans. Although they are short term loans, they often have high-interest rates. Only make these loans when you really need the money.
3. Personal Loans
A personal loan is your best option when you want a flexible loan with a moderate-repayment option. Personal loans can be used for a lot of things. Whether it’s for a car repair, a medical bill, or using it as a capital for business, a personal loan can help you get started.
One of the best uses for a personal loan is debt consolidation. If you’re trying to pay off a credit card debt with high interest, you can save more money by paying it with a low-interest personal loan. With its flexible and structured payment options, you’ll have more ease in paying back the personal loan than paying off that credit card debt.
4. Secured Loans
Lenders prefer secured loans because there is less risk involved. All you need is collateral for those who have bad credit scores to avail of a secured loan. Alternatively, you can also ask the help of a relative or a close friend so they can act as a cosigner for you. A cosigner can be held liable just like the borrower in paying up debt. The only catch is that the cosigner should have a good credit standing.
5. Family or Friends
When all else fails, why not ask help from friends and family? Forget hard checks and credit scores, if you’ve earned the trust from them, why not ask them for money that you’re sure you can pay back in time. Just make sure to do good on your promise as a missed payment can often strain relationships.
Don’t worry if you have bad credit scores. The options mentioned above are worth considering. Just pay your loans on time and avoid any unnecessary spending. Before you know it, you’ll start building up a good credit score and finally be on your way towards financial stability.