It’s a known fact. It’s tough to get a personal loan with bad credit. Bad credit is defined as having a FICO score below 675. Having a FICO score of 600 will make it extremely difficult to obtain a personal loan through most traditional lenders such as banks and credit unions. But, if you need to get a loan with a 600 FICO score, you can. You will just need to know where to look and what to expect.
Locate a lender willing to work with you. This can be your bank, a credit union or a lender than specializes in lending to people with bad credit. It is best to work with a bank or credit union if you can because the interest rate will be much less than working with a bad credit lender.
Be prepared to offer collateral. In most cases, an item of security will have to be pledged against the balance of the loan for people with bad credit. The lender will place a lien against the pledged property and will foreclose on the property in order to sell it if the borrower defaults on the loan. In most cases, the value of the collateral will need to exceed the principal balance of the loan. The lien will be removed when the loan balance in paid in full.
Get a co-signer. This is someone with better credit than you that is willing to take responsibility for the loan if you cannot pay it. This person can be a family member, a friend, employer or anyone else you know that will help you. Understand that this person will be legally responsible for paying the note if you default, so choose your co-signer carefully.
Only apply for one loan at a time. If you apply for multiple loans at once, your credit will take an even bigger hit and lenders will be less likely to lend to you if they think you may get in over your head.
Understand the terms of the loan. Most personal loans issued to people with bad credit will have higher interest rates than those issues to people with good credit. The terms for repayment can also be somewhat shorter than for other types of loans. Before signing the agreement, make sure that you understand what the lender’s expectations are and whether or not you can meet them.
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