Having a bad credit score can land you with limited lending options, as most banks need you to have a good credit score above 680 to get a loan with a decent interest rate. You may have a bad credit report for many reasons other than failure or delay in repayment.
At times it can happen due to financial issues or can be a case of not applying for a loan in history. Lenders usually are hesitant to provide loans for any of such cases. But the good news for you is that applying for personal loans with bad credit can help you build a better credit history.
Ensure considering the below-mentioned things before selecting your lender and availing the loans.
Kind of Personal Loans You Can Take with Bad Credit Financing
There can be various reasons for taking a personal loan like renovation, buying a car, or anything that can help you enhance the quality of living. Below is a list of loans you can take for yourself:
- Car
- Holiday
- Wedding
- Renovations
- Medical
- Debt consolidation
- Furniture and appliances
After you have decided the kind of loan, you need to know the types of personal loans available like secured or unsecured loans, student loans, fixed and variable rate personal loans, etc. These come with their merits and cons, and you need to look for the most suitable option.
Documents Needed When Applying for Personal Loans With Bad Credit
Getting your loan approved sometimes comes with charges such as setup and monthly loan fees, early exit penalty, and late repayment charges. Make sure before applying that you read through all of these conditions.
In case you don’t have a good credit history, you need to ensure the following documents are appropriately maintained and provided while applying for a loan:
- Identity proof: like passport, medical care card, driving license
- Income proof: payslips
- Financial details: these include your assets, liabilities, expenses, income, and debts
- References: can be from your landlord or any valid entity
How to Prove Your Credit Worthiness If You Have a Bad Credit Score?
There are some everyday things that you can provide to prove your creditworthiness, like:
- Your job history details which include pay stubs and salary
- Assets you possess like house, property car and how well are you able to pay for it
- Your list of unsecured debts like medical bills, credit cards
- Whether you receive or pay child support or alimony
- Your bank statements for savings, CDs, checking
These documents can significantly help you prove that you can avail of and repay the loan.
Specific Points To look Before Selecting Personal Loan:
- How feasible is the borrowing?
- Fees – low or high
- Fixed interest or variable interest rates
- Flexibility of repayments
Final Word
You can’t expect a single loan to boost your score a lot, but if you repay the debt with your credit card, it can increase your credit score, which impacts your credit utilization rate in a good way.
If you are wondering whether a personal loan can benefit your credit score, the good news is that it does. Various credit mixes can help you increase your report and credit score. But you shouldn’t be taking a loan only for this purpose. Ensure you need the money.
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