Personal Loans with Bad Credit

[Jun 12, 2010.]

 

Having bad credit can make it tough to qualify for a personal loan. But if you really need some cash it may be possible to find a lender who is willing to loan you money. You just may have to do some work first. Take the following steps to increase your chances of getting a loan.

Develop Good Spending Habits

Start tracking where your money goes so you can show that you are responsible with your finances. Open a checking and savings account if you don't have one. Force yourself to stick to a budget so that you don't overdraw your checking account. When you apply for a personal loan banks want to see how you are managing your income. If you are able to save even a little money each month, do so.

Pay Bills on Time

It is important to pay all your bills on time each month. FICO bases 35% of your credit score on your payment history. Staying current with monthly obligations improves the chance that a lender may allow you to borrow a personal loan.

Avoid New Debt

Running up more debt is only going to hurt your chances of getting a loan. Go cold turkey and avoid using up existing credit lines. Charging up to or over the limit can contribute to bad credit getting even worse. FICO bases 30% of your credit score on the amounts owed on existing debt. Any time a lender thinks you have already overextended yourself, you are less likely to get approved for a new loan.

Join a Credit Union

Getting a loan from a credit union may not be as tough as going to a bank. Find out if your employer, church, community group, or other organizations you belong to have a credit union you can join. Becoming a member doesn't guarantee that you are going to be approved for a personal loan, but you might get a second look if you are denied. You might get a chance to plead your case and show that you've cleaned up your act to repair bad credit.

Why Do You Want a Loan?

Think about why you want a personal loan if you already have bad credit. Do you plan to use it for debt consolidation, or are you hoping to buy more stuff? Compare loan deals to help determine whether or not borrowing money is a good idea.

 

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.