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How to get a bad credit loan

Knowing what to expect when applying for a bad credit personal loan makes the process that much smoother. Luckily, the process is similar to getting a personal loan with an excellent credit rating. Here are five steps you need to follow.

1. Check your credit history and reports

You may know that your credit score is negative, but you have not requested a report recently. Take a few minutes to check your credit score and go through your credit report with a fine-toothed comb.

Check for errors and accounts or hard requests that should have dropped. You can write to the credit bureaus with any changes you want, or file a dispute online at the Experian, Equifax, or TransUnion website.

Are there small debt accounts that you can pay off or catch up on before applying for a loan? Make sure you’re up to date on your credit history so lenders don’t jump you when you’re trying to get a personal loan.

2. Check your financial situation

Personal loans are convenient and help you get cash quickly when you need it. Before attempting to get a loan, it is helpful to assess your financial situation. Getting a loan that is too expensive to repay on time can negatively impact your credit score. Even if you want to use collateral for a secured personal loan, you don’t want to be without a valuable asset like a car.

Think about how much other debt you have, what your income is, and how much you can realistically afford each month. You could lower the amount you want to borrow and cut spending in other areas of your budget to get things working.

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Realize that getting the money you need is only half the battle. To really win you have to make sure you can pay back the loan.

3. Start researching and pre-qualifying

Avoid applying for multiple personal loans at the same time as this could result in multiple difficult applications. Get pre-qualified with an online lender that caters to people with bad credit to save time and stress.

Call local credit unions to see if they have personal loan options with lenient requirements. View fees, loan amounts, and terms. Make sure the loan details match your needs. You can ask:

  • Does the lender have prepayment penalties if you decide to prepay your loan?
  • What is the minimum credit requirement and are there any income requirements?
  • Can you use a co-signer or is there an option for a secured personal loan?
  • What would your monthly payment be and is it affordable?

4. Gather financial records and apply

Once you’ve decided on a solid personal loan option, submit a formal application and gather your financial records. Lenders will want to see proof of residency, proof of income, a driver’s license and possibly a bank statement.

Try to respond promptly to requests for additional documentation to expedite the loan process.

5. Check the terms before accepting a loan offer

If you are approved for a personal loan, take a moment to review the loan terms and read through the agreement. If something doesn’t make sense, ask the lender for clarification. This ensures that you fully understand and accept the terms of the loan.

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Once you agree, the lender will fund your loan and you will get the borrowed money back in one lump sum within a few business days.