Tips For Securing a Loan With a Low Credit Score
For personal or business reasons, it is likely that at some point, you may look to take out a loan. Loans are invaluable for large purchases, like a home or vehicle. In a business setting, they are frequently necessary at the outset, and for elements of future growth, like a store expansion. Whatever your reason, a loan is typically easier and more favorable to secure with a high credit score. Lenders will see you as more reliable, and consequently be more willing to let you borrow money at better rates.
Of course, not everyone has good credit, often due to no fault of their own. Student or other debt, financial difficulties from your past, or other factors may have lowered your credit score. Fortunately, it’s not impossible to borrow, even with low credit.
Consider Alternative Lending Options
Banks and credit unions often have stringent criteria for loans, and may require a certain credit score to even offer a loan. If yours is too low, alternative lending options may provide plausible means to secure financing. These include crowdfunding, working with venture capital or angel investors, or securing a private loan. The virtue of these methods is that rates and terms are typically negotiated on an individual basis, meaning that a strong personal relationship can help secure a suitable loan. On the other hand, some lenders will insist on higher interest rates or more onerous terms, in order to offset perceived risk.
Work With a Partner
Sometimes, you may be able to achieve a favorable loan by working with a partner, and taking your loan out in his or her name. For instance, some couples pursue this method when buying a house: if one spouse has poor credit, a mortgage will be established in the other’s name. While this is not always possible, and may depend on your financial institution, it can be an effective way to secure a loan for personal or business reasons.
Build Your Credit
Finally, one strategy is simply to work on improving your existing credit. Regular repayment of debts will help build credit. This process can be helped along by taking out a credit card or business line of credit, then using it regularly (but for minimal purchases), and ultimately steadily repaying the debt. While this can take time, the ultimate effect of higher credit can be enormously helpful.
In other words, no matter your present financial situation, there may be a way to secure financing. Consider the tips above and whether one might be adequate for you to access necessary funding.