How to Get a Loan with Bad Credit?

Individuals, families and businesses are still struggling after the economic downturn in 2008. Many are now searching for ways to improve their circumstances, whether it is to buy a newer car, support their business idea or buy a house, but have bad credit. While it is not easy to get a loan with bad credit, there are steps that you can take to improve your circumstances and increase your chances of getting the loan.

  • Take Steps to Improve Your Credit

Before going for a loan, get a copy of your credit report and take the steps to improve your credit. The best thing to do is find out why your credit score is so low – is there a bill that you forgot to pay from 10 years ago? Did you default on a loan? Do you keep struggling to stick within your credit limit? By understanding more about your finances, you will be able to take the steps to improve it.


Looking at your credit file will also help make sure that everything included is really yours. For example, there could be someone with the same name as you and it has been included on your credit file or there may have been a disputed payment that is included. If you cannot get through to the company then contact the credit agency and dispute the information stored on the file.

It will take time to improve your credit so don’t expect anything overnight. Depending on the damage that has happened, it can take seven years to see a full improvement but that doesn’t mean the little steps along the way are not worth it. Prove your worthiness by getting your payments up to date and getting a little further away from that credit limit.

  • Save Up a Bigger Deposit

Saving up a deposit is a benefit in a number of ways. You will lower the amount that you need to borrow, increase the chance of gaining finance, pay less interest and pay lower monthly payments to make it easier to manage your money. Lenders often like to see at least 10% saved for mortgages and car loans but having up to 50% for a deposit will prove that you are sensible with your money and serious about your repayments.

However, avoid allowing your credit rating to get worse for the sake of a deposit. You will need to work on both at the same time and set up a budget to help you. This will help you determine the amount of disposable income you have at the end of each month, the amount you can spend on your debts and then the left over amount for your savings

  • Ask for a Co-Signer

One way of improving your chances is by getting a co-signer. This will need to be someone related to you who has a better credit rating and is in full-time employment. Your co-signer will need to trust you and it is important to talk about your finances at all times so your guarantor isn’t left paying the bills. The benefit for the lender is that there is less chance of defaulting problems. The lender will be able to seek repayments from your co-signer if you fail to meet the monthly repayments.

Getting a loan with bad credit is possible but it will be difficult. You need to prove that you can handle your money and that you will stick to the agreement. This means helping your credit rating and saving up more of a deposit.

Author bio:

This guest post was written by Andrew, a finance expert. As well as offering advice on the various types of loans and finance deals, he offers tips on easy personal loans and getting loans with bad credit.

Filed in: Loans

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