In today’s world, credit means everything, and you often have to borrow money for a variety of reasons from buying a car to handling and emergency or starting your own business to improve your financial position.
Knowing your credit score, understanding it, and knowing where you can borrow anyway even if you have bad credit is essential. While working to improve your credit is the best option, you often need to borrow money and pay it back to prove you are a good credit risk. Here are five ways to borrow even with bad credit.
Credit Cards
Even if you have bad credit, if you have some reliable income there are those companies out there who will issue you a credit card. Some of these need to be secured with a deposit in a savings account or a CD, but they can help you improve your credit. Others are unsecured but carry higher interest rates than if you had better credit.
Finding these cards is pretty easy. The key is to manage them properly. Pay payments on time or early. Pay more than minimums whenever possible and keep balances under 30% of the limit you have available. Use them sparingly, only for things you need.
If you use credit cards wisely, you will be able to borrow more and improve your credit, and you can get started even if your credit is bad now.
Friends and Family
Friends and family are another source you can borrow from. While these types of loans are not reported to a credit bureau, they can help you through hard financial times. Even if you pay your family and friends interest, it will be lower than what you would pay a bank or credit card.
This might not be your best choice, but if you need to borrow you might want to explore it. Just be sure that you pay your payments on time and communicate if you cannot. No loan amount is worth ruining a relationship over, so be careful. Don’t borrow more than you can repay and try to get back on your feet as fast as possible.
Be careful not to just use friends and family as a resource for money. If every time they see you coming you have your hand out, they will start to avoid you. Keep borrowing from friends and family to a minimum.
Personal Loans
Yes you can get a personal loan even if you have bad credit. There are a number of sources for these loans and if you have a steady income, they are often not hard to get at all. There are several no-credit-check loan companies who will serve you.
The key is to be aware that you will probably pay a higher interest rate than if you had better credit. That is okay. These loans can be used to help you when you need funding and to build better credit to make borrowing even easier and less costly in the future.
Personal loans can be used for a variety of things from purchasing a car that you can’t traditionally finance to help you start a business, consolidate other bills, or pay for expenses when money is tight. Use these loans wisely as well, never borrowing more than you can afford.
Secured Loans
Secured loans are entirely different, in that they are usually secured by something of value that you own, like your home, investments, or even your 401k. The good news is since these loans are secured by collateral, they are often easier to get and will carry lower interest rates than an unsecured personal loan.
The downside is that there is a risk. If you were to default on your loan for any reason, you could lose your assets. For instance, if you took out a home equity line to start a business and the business failed so you could not repay the loan, you could lose your home.
This is why especially in these cases it is essential that you not borrow more than you can afford and that you make payments on time or early. Despite the risk, these are loans you can get even if you have bad credit.
Use Co-Signers
Another potential solution is to use co-signers. This simply means that a person other than you signs the loan application as well, promising to pay if you cannot. Co-signers are most often friends and family. This arrangement keeps them from loaning you money personally, but they are assuring the lender that you are a good risk by backing you up.
The key to these kinds of loans is that you can get better terms and interest rates, but it is of utmost importance that you pay on time and keep up on your payments, otherwise it has a negative impact on the co-signer and even risks the lender going after them. Don’t do this type of loan unless you are sure that you alone can afford to pay it back in a timely manner.
Having less than perfect credit can be problematic, but there are solutions. You can still borrow when you need to, even with bad credit, and doing so can improve your credit score, making it easier for you to borrow in the future.
