Shopping for a Loan with Poor Credit

When you have made money mistakes in the past or if you have nearly run up the balance on your credit cards, you may have a difficult time taking out a loan. The type of loan you are looking for may determine how easy it is to find. For example, it may be easier to receive a car loan than a personal loan, since you do have collateral if you do not make your payments. If you have poor credit, and you have overextended yourself, you may not be able to qualify for a loan. Before you even apply for a loan, you need to look at your budget and determine if you can afford to add the monthly payment to your expenses. If things are going to be too tight, you should try to come up with a different solution to your problem.

1.  Clean Up Your Credit

The firs step you need to take before you borrow money is to clean up your credit reportas much as you can. It does take time to completely repair your credit, but there are things you can do now to make it easier for a bank to loan you money. The first thing you need to do is to get current on all of your payments. This includes your cable and utility bills. You are not going to qualify for a decent loan if you are behind on payments or you have outstanding bills due to a wide variety of businesses. You can set up payment plans for hospital bills, which may help if they have started reporting you to the credit bureau. Being current for a at least six months will help you when it is time to apply for a new loan.

2.  Start With Small Banks and Credit Unions

The first step is to look at your local banks and credit unions when you apply for a loan. It helps if you can fill out the application in person and meet with a loan officer. This gives you the opportunity to explain your circumstances and point out the areas where you have improved over the last few months. Smaller banks and credit unions look at your entire pictures. They are more willing to work with you when you have bad credit or extenuating circumstances. Additionally, you may be able to qualify for a better interest through them.

3.  Look at Businesses That Offer Poor Credit Loans

If you need to have the money right now, and you have exhausted all of your other options including taking on a second job, canceling your television and lowering your spending on everything but the barest of necessities, you may consider using a loan store or one the offers you get in the mail for a loan. These are last resort options because the rates on the loans are so high. They are a better option than a payday loan, but you should be careful when you take out this type of loan. You should make sure you can payoff the loan and work to pay it off as quickly as possible.

4.  Look for Alternatives to Borrowing the Money

If you do not qualify for the loan through the bank or credit union, you may want to consider alternatives to borrowing money. Sometimes you are in a situation where you need to borrow the money, but often there are ways you can work around taking out a loan. For example, you need a car to get to work. You can compromise by saving up cash quickly to buy a cheap car. Then you can put money aside to save up for a nicer car and to cover any repairs you ay need to pay for. In this situation you are making to do while you save up, and it is like paying yourself the loan payment each month. You may try to work out a payment plan with a hospital or other business if you find out that you owe a large sum of money for an emergency situation. If it is to get something that is not a necessity, then it is best to wait and save up cash for whatever you need to purchase. Another option you may consider is taking out a 401(k)loan but only if it is a true emergency.