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Can you get a personal loan with bad credit?

[Jan 20, 2011.]

 

Borrowing money and having bad credit don't usually mix. Despite the abundance of ads online stating that you can get a personal loan even if you have bad credit, it can be tough to qualify. There are a few things you can do, however, that might improve your chance of getting a loan.



  • Get a second job. Lenders want to know that you have enough income to cover monthly loan payments. Moonlighting could lift your income enough to convince a lender to take a risk on giving you a loan. Also, with more income you can decrease your existing debt-to-income ratio, which could help your credit score.

  • Offer collateral. Do you have a boat, a motorcycle, jewelry or some other valuable item that could be used to secure a personal loan? When you apply for a personal loan, bad credit may not be so much of a strike against you if lenders know that you are willing to put up some type of collateral. Of course if you don't pay back the loan you will have to turn over your property to the lender.

  • Go to your credit union. Maybe you've been a member of a credit union for years and have never thought about borrowing money. Credit unions are owned and run by members, so you may get more personal service when applying for a loan. Even if you don't have the best credit you may be able to get a loan by agreeing to having the monthly payments deducted from your paycheck.

  • Accept a higher interest rate. People with bad credit usually don't receive the best interest rates that are advertised. So if you have a poor credit history, expect to pay high interest if you actually get approved for a loan. Decide if the high cost of borrowing money is really worth it before signing a loan contract.


It's never a good idea to borrow more money if you already have a lot of debt from loans and credit cards. However, in some situations it could make sense to use a loan to consolidate high-interest debt. But try to cut your expenses and raise your income as much as possible before turning to a personal loan.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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